Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $601,700 and has $349,100 of accumulated depreciation to date, with a new machine that has a purchase price of $485,200. The old machine could be sold for $65,000. The annual variable production costs associated with the old machine are estimated to be $158,700 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,000 per year for eight years.

a.1 Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
May 29
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Proceeds from sale of old machine	$fill in the blank ac44cd05e05500e_1	$fill in the blank ac44cd05e05500e_2	$fill in the blank ac44cd05e05500e_3
Costs:
Purchase price	fill in the blank ac44cd05e05500e_4	fill in the blank ac44cd05e05500e_5	fill in the blank ac44cd05e05500e_6
Variable productions costs (8 years)	fill in the blank ac44cd05e05500e_7	fill in the blank ac44cd05e05500e_8	fill in the blank ac44cd05e05500e_9
Profit (Loss)	$fill in the blank ac44cd05e05500e_10	$fill in the blank ac44cd05e05500e_11	$fill in the blank ac44cd05e05500e_12

a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.