EX 25-10 Differential analysis for machine replacement Obj. 1 Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is Excel $60,000, the accumulated depreciation is $24,000, its remaining useful life is five years, and its residual value is negligible. On May 4 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 $180,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Proposed Operations Operations Sales $205,000 $205,000 Direct materials $ 72,000 $ 72,000 Direct labor 51,000 Power and maintenance 5,000 18,000 Taxes, insurance, etc. 1,500 4,000 Selling and administrative expenses 45,000 45,000 Total expenses $174,500 $139,000