1. Replace Equipment

A machine with a book value of $249,800 has an estimated six-year life. A proposal is offered to sell the old machine for $215,000 and replace it with a new machine at a cost of $280,400. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300.

Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2. Process or Sell

Product A is produced for $3.36 per pound. Product A can be sold without additional processing for $4.19 per pound or processed further into Product B at an additional cost of $0.43 per pound. Product B can be sold for $4.34 per pound.

Prepare a differential analysis dated November 15 on whether to sell A (Alternative 1) or process further into B (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) October 3 Continue with Replace Old Differential Effect Old Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine $ 1 Costs: Purchase price Direct labor (6 years) Income (Loss) Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)? Differential Analysis November 15 Process Further Sell Product A into Product B (Alternative 2) Differential Effect on Income (Alternative 2) A Revenues, per unit Costs, per unit Income (Loss), per unit $ Should Product A be sold (Alternative 1) or processed further into Product B (Alternative 2)