Differential Analysis for Machine Replacement Proposal Flint Tooling Company is considering replacing a machine that has been used in its factory for 4 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: Cost of machine, 10-year life Old Machine Annual depreciation (straight-line) $107,800 10,780 Annual manufacturing costs, excluding depreciation 38,700. Annual nonmanufacturing operating expenses Annual revenue 12,500 94,000 Current estimated yelling price of the machine 35,000 Cost of machine, 6-year life New Machine Annual depreciation (straight-line) Estimated annual manufacturing costs, exclusive of depreciation $136,200 22,700 18,800 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 differential profit that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis 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 differential profit that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Line Item Description Continue with Old Machine (Alternative 1) Replace Old Machine Differential Effects (Alternative 2) (Alternative 2) Revenues Proceeds for sale of old machine Costs Purchase price Annual manufacturing costs (6 yrs.) Profit (loss) 2. What other factors should be considered before a final decision is reached? a. Are there any improvements in the quality of work turned out by the new machine? b. What opportunities are available for the use of the funds required to purchase the new machine? c. 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? d. What affect would this decision have on employee morale? e. None of these choices are correct