Saginaw Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
1. Prepare a differential analysis as of September 10, 2012, comparing operations using the present equipment (Alternative 1) with operations using the new equipment (Alternative 2). The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired.
2.  List other factors that should be considered before a final decision is reached.

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Old Machine Cost of machine, eight-year life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses $44,000 5,500 16,300 3,100 Annual revenue 29,600 Current estimated selling price of the machine 21,000 New Machine Cost of machine, six-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, exclusive of depreciation $72,000 12,000 5,900