Question: A machine with a book value of 80 000 has
A machine with a book value of $ 80,000 has an estimated five-year life. A proposal is offered to sell the old machine for $ 50,500 and replace it with a new machine at a cost of $ 75,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $ 11,200 to $ 7,400. Prepare a differential analysis dated April 11, 2014, on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2).
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