Machine Replacement Decision

A company is considering replacing an old plece of machinery, which cost $$598,200$ and has $$348,700$ of accumulated depreciation to date, with a new machine that has a purchase price of $$485,800.$ The old machine could be sold for $$62,900.$ The annual variable production costs associated with the old machine are estimated to be $$158,900$ per year for eight years. The annual variable production costs for the new machine are estimated to be $$100,300$ 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 $29$

$\backslash$table$[[,\backslash$table$[[$Continue$],[$with Old$],[$Machine$],[($Alternative $1)]],$Replace Old Machine $($Alternative $2),$Differential Effects $($Alternative $2)],[$Revenues:$,,,],[$Proceeds from sale of old machine,$$,$$$,!],[$Costs:$,,,],[$Purchase price,,,$],[$Variable productions costs $(8$ years$),,,],[$Profit $($Loss$),,$$$,$$$]]$