Differential Analysis for Machine Replacement Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $94,800, the accumulated depreciation is $37,900, its remaining useful life is 5 years, and its residual value is negligible. On October 1 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 $197,200. The automatic machine has an estimated useful life of 5 years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on present and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Present Propose Operations Operations $300,500 $300.500 $102,400 $302,400 71,100 6.400 35,100 2,400 7.900 71,100 71.100 $253,600 $216,500 a. Prepare a differential analysis dated October 1 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. 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 loss. Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine October 1 Line Item Description Continue with Old Machine Replace Old Machine Differential Effects (Alternative 2) Sales (5 years) Cost Purchase price Direct materials (5 years) Direct labor (5 years) Power and maintenance (5 years) Taxes, insurance, etc. (3 years) Selling and admin, expenses (5 years) Prof b. Based only on the data presented, should the proposal be accepted? c. Differences in capacity between the two alternatives is before a final decision is made. to conside