Question: A machine with a book value of 126 000 has
A machine with a book value of $ 126,000 has an estimated six- year life. A proposal is offered to sell the old machine for $ 98,000 and replace it with a new machine at a cost of $ 155,000. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $ 68,000 to $ 58,000. Prepare a differential analysis dated February 18, 2014, on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2).
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