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 13,400

Annual nonmanufacturing operating expenses 2,700

Annual revenue 36,400

Current estimated selling price of the machine 13,900

New Machine

Cost of machine, six-year life $67,000

Annual depreciation (straight-line) 9,500

Estimated annual manufacturing costs, exclusive of depreciation 4,400

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by

purchase of the new machine.

• 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 six-year period if the new machine is acquired.