=+E12-9 Differential analysis report for machine replacement Obj 1 SPREADSHEET

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a. Annual differential increase in costs,

$2,500 Bay Area Electronics Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost ofthe machine is $140,000, the accumulated depreciation is $110,000, its remaining useful life is 15 years, and its salvage value is negligible. On January 20, 2008, a proposal was made to replace the present manu¬

facturing procedure with a fully automatic machine that will cost $270,000. fhe automatic machine has an estimated useful life of 15 years and no significant salvage value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations:

Present Operations Proposed Operations Sales $275,000 $275,000 Direct materials $ 80,000 $ 80,000 Direct labor 45,000 —

Power and maintenance 7,500 32,000 Taxes, insurance, etc. 3,500 8,500 Selling and administrative expenses 80,000 80,000 Total expenses $216,000 $200,500