Solved

Gutenberg publishers Inc. Is considering replacing a machine that has been used in its factory for 4 years. Relevant data associated with the operations of the old machine the new machine. neither of which has any estamated residua' value, are as follows: Old Machine Cost Of machine. IOyear life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price Of the machine New Machine Purchase price Of machine. 6-year life Annual depreciati (straight-line) Estimated annual manufacturing costs, excluding depreciation $120,000 12,000 30,000 22,500 90,000 40,000 $160,000 16,000 7,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: I. prepare a differential analysis as of November 30 comparing operations using the present machine (Alternative I) With operations using the new machine (Alternative 2). The anatysiS should indicate the total that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter If required, use a minus sign to indicate a loss. Differential Analysis Continue With (Alt. I) or Replace (Alt. 2) Old Machine November 30 Continue with Old Replace Old Machine Differential Effect (Alternative 2) (Alternative 2) Machine (Alternative 1) Line Item Description Proceeds from sale Of old machine purchase price Annual manufacturing costs (6 yrs) Profit (loss)