Replace Equipment A machine with a book value of $25,000 has an estimated remaining lide of...
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Replace Equipment A machine with a book value of $25,000 has an estimated remaining lide of 5 years. A proposal is offered to sell the old machine for $18,800 and replace it with a new machine at a cost of $40,000. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $17,500 to $9,000. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0" If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine June 2 Continue t with Old Line Item Description Machine Replace Old Machine Differential Effects (Alternative 1) (Alterative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price 0 1000 18.000 Direct labor (5 years) Profit (loss) 0 40,000 40,000 87.500 57.500 Replace Equipment A machine with a book value of $25,000 has an estimated remaining lide of 5 years. A proposal is offered to sell the old machine for $18,800 and replace it with a new machine at a cost of $40,000. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $17,500 to $9,000. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0" If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine June 2 Continue t with Old Line Item Description Machine Replace Old Machine Differential Effects (Alternative 1) (Alterative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price 0 1000 18.000 Direct labor (5 years) Profit (loss) 0 40,000 40,000 87.500 57.500
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