Differential Analysis for Machine Replacement Proposal

Franklin Printing Company is considering replacing a machine that has been used in its factory for four 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, ten-year life	$107,200
Annual depreciation (straight-line)	10,720
Annual manufacturing costs, excluding depreciation	38,600
Annual nonmanufacturing operating expenses	11,500
Annual revenue	94,700
Current estimated selling price of the machine	35,300
New Machine
Cost of machine, six-year life	$139,200
Annual depreciation (straight-line)	23,200
Estimated annual manufacturing costs, exclusive of depreciation	18,000

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