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 $77,800, the accumulated depreciation is $31,100, 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 $161,800. 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 Operations		Proposed Operations
Sales	$246,600		$246,600
Direct materials	$84,000		$84,000
Direct labor	58,400
Power and maintenance	5,400		28,800
Taxes, insurance, etc.	1,900		6,500
Selling and administrative expenses	58,400		58,400
Total expenses	$208,100		$177,700

Question Content Area

a. Prepare a differential analysis dated May 4, to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0".

Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 4

	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Sales (5 years)	$fill in the blank edfa610b1fea00a_1	$fill in the blank edfa610b1fea00a_2	$fill in the blank edfa610b1fea00a_3
Costs:
Purchase price	fill in the blank edfa610b1fea00a_4	fill in the blank edfa610b1fea00a_5	fill in the blank edfa610b1fea00a_6
Direct materials (5 years)	fill in the blank edfa610b1fea00a_7	fill in the blank edfa610b1fea00a_8	fill in the blank edfa610b1fea00a_9
Direct labor (5 years)	fill in the blank edfa610b1fea00a_10	fill in the blank edfa610b1fea00a_11	fill in the blank edfa610b1fea00a_12
Power and maintenance (5 years)	fill in the blank edfa610b1fea00a_13	fill in the blank edfa610b1fea00a_14	fill in the blank edfa610b1fea00a_15
Taxes, insurance, etc. (5 years)	fill in the blank edfa610b1fea00a_16	fill in the blank edfa610b1fea00a_17	fill in the blank edfa610b1fea00a_18
Selling and admin. expenses (5 years)	fill in the blank edfa610b1fea00a_19	fill in the blank edfa610b1fea00a_20	fill in the blank edfa610b1fea00a_21
Income (Loss)	$fill in the blank edfa610b1fea00a_22	$fill in the blank edfa610b1fea00a_23