Boyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $76,700, the accumulated depreciation is $30,700, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $159,500. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations:

	Present Operations		Proposed Operations
Sales	$243,100		$243,100
Direct materials	$82,800		$82,800
Direct labor	57,500
Power and maintenance	5,400		28,400
Taxes, insurance, etc.	1,900		6,400
Selling and administrative expenses	57,500		57,500
Total expenses	$205,100		$175,100

Question Content Area

a. Prepare a differential analysis dated May 4 to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:	blank	blank	blank
Sales (5 years)	$fill in the blank 57592609ffbef84_1	$fill in the blank 57592609ffbef84_2	$fill in the blank 57592609ffbef84_3
Costs:
Purchase price	fill in the blank 57592609ffbef84_4	fill in the blank 57592609ffbef84_5	fill in the blank 57592609ffbef84_6
Direct materials (5 years)	fill in the blank 57592609ffbef84_7	fill in the blank 57592609ffbef84_8	fill in the blank 57592609ffbef84_9
Direct labor (5 years)	fill in the blank 57592609ffbef84_10	fill in the blank 57592609ffbef84_11	fill in the blank 57592609ffbef84_12
Power and maintenance (5 years)	fill in the blank 57592609ffbef84_13	fill in the blank 57592609ffbef84_14	fill in the blank 57592609ffbef84_15
Taxes, insurance, etc. (5 years)	fill in the blank 57592609ffbef84_16	fill in the blank 57592609ffbef84_17	fill in the blank 57592609ffbef84_18
Selling and admin. expenses (5 years)	fill in the blank 57592609ffbef84_19	fill in the blank 57592609ffbef84_20	fill in the blank 57592609ffbef84_21
Profit (Loss)	$fill in the blank 57592609ffbef84_22	$fill in the blank 57592609ffbef84_23	$fill in the blank 57592609ffbef84_24

Question Content Area

b. Based only on the data presented, should the proposal be accepted?

Should be acceptedShould not be accepted

c. Differences in capacity between the two alternatives is

relevantnot relevant

to consider before a final decision is made.