Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $105,000 and has $55,000 of accumulated depreciation to date, with a new machine that has a purchase price of $83,000. The old machine could be sold for $56,300. The annual variable production costs associated with the old machine are estimated to be $8,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $5,000 per year for eight years. a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "o". For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Continue Replace Differential with Old Old Effect Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues Proceeds from sale of old machine 56,300 Costs: Purchase price Variable production costs (8 years) Income (Loss) 56,300 . 3,000 X $1,000 X 6,000 X 40,000 X 28,000 68.000 X 66,700 X 1.100 Feedback Check My Work a For the continue and replace alternatives subtract the costs from the revenues. Multiply the variable production costs for the eight year Me Determine the differential effect on income of the revenues, cous, and income (0) by subtracting alternative from alternative 2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine Replace the old machine