Differential Analysis Report 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, 10-year life	$107,900
Annual depreciation (straight-line)	10,790
Annual manufacturing costs, excluding depreciation	37,900
Annual nonmanufacturing operating expenses	13,300
Annual revenue	94,500
Current estimated selling price of the machine	35,300
New Machine
Cost of machine, six-year life	$137,400
Annual depreciation (straight-line)	22,900
Estimated annual manufacturing costs, exclusive of depreciation	17,900
Annual nonmanufacturing operation expenses	10,000

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

Prepare a differential analysis report comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. Enter all amounts as positive numbers.

Franklin Printing Company Proposal to Replace Machine Annual manufacturing costs as Annual reduction in manufactu Annual reduction in manufactu Number of years applicable x Cost reduction attributable to 35300 Proceeds from sale of present 137400 Cost of new machine Differential income anticipate