Differential Analysis for Machine Replacement Bayer Digital Components Company assembles circuit boards by using a manually operated machine to Insert electronic components. The original cost of the machine is $81,400, the accumulated depreciation is $32,600, 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 $169,300. 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: Proposed Operations $258,000 Sales Present Operations $258,000 $87,900 61,100 5,700 2,000 Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses 587,900 30,100 6,800 61,100 61,100 $217,800 $185.900 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 "O". It required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 4 Continue with Old Replace Differential Machine Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) eBook Print Item Present Operations $258,000 Proposed Operations $250,000 $87,900 Sales Direct materials Direct labor Power and maintenance Taxes, Insurance, etc. Selling and administrative expenses Total expenses $87.900 61,100 5,700 2,000 61,100 30,100 6,800 61,100 $185,900 $217,800 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 "o". It required, use a minus sign to indicate a los Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 4 Continue with Old Replace Differential Machine Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Sales (5 years) Costs: Purchase price Direct materials (5 years) 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 los Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 4 Continue with Old Replace Differential Machine Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Sales (5 years) Costs: Purchase price Direct materials (5 years) Direct labor (5 years) Power and maintenance (5 years) Taxes, insurance, etc. (5 years) Selling and admin, expenses (5 years) Profit (Loss) b. Based only on the data presented, should the proposal be accepted? to consider before a final decision is made c. Differences in capacity between the two alternatives is Next