1. Differential Analysis for Machine Replacement Proposal

   Flint 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:

   Old Machine
   Cost of machine, eight-year life	$38,000
   Annual depreciation (straight-line)	4,750
   Annual manufacturing costs, excluding depreciation	12,400
   Annual nonmanufacturing operating expenses	2,700
   Annual revenue	32,400
   Current estimated selling price of the machine	12,900
   New Machine
   Cost of machine, six-year life	$57,000
   Annual depreciation (straight-line)	9,500
   Estimated annual manufacturing costs, exclusive of depreciation	3,400

   Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

   Required:

   1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the The difference between the differential revenue and the differential costs.differential income that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". Use a minus sign to indicate subtracted amounts, negative amounts, or a loss.

   Differential Analysis
   Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
   November 8
   	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
   Revenues:
   Proceeds from sale of old machine	$	$	$
   Costs:
   Purchase price
   Annual manufacturing costs (6 yrs.)
   Income (Loss)	$	$	$

   Feedback

   2. What other factors should be considered before a final decision is reached?

   1. Are there any improvements in the quality of work turned out by the new machine?
   2. What opportunities are available for the use of the funds required to purchase the new machine?
   3. Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine?
   4. What effect would this decision have on employee morale?
   5. None of these choices are correct.