Manuco is considering whether to repair or replace its manufacturing equipment. It is now in need of repairs that will cost $$26,000.$ It has three years left of its useful life. Manuco must determine whether to go ahead with the repairs, or to purchase a new machine to replace the old one. A new, more efficient machine costs $$205,000$ and will have an $3-$year useful life, after which it will have no salvage value. The new machine would reduce variable manufacturing costs from $$166,000$ to $$114,000$ annually. As well, the old machinery can be sold for $$65,000.$

Do not enter dollar signs or commas in the input boxes.

Use the negative sign for values that must be subtracted.

Indicate repair or replace using the drop$-$down list.

a$)$ Prepare a differential analysis based on the remaining useful life $(3$ years$)$ of the old machinery without consideration of the time value of money or depreciation expense on the asset.

Repair Equipment Replace Equipment Difference

Variable MOH $Answer

$Answer

$Answer

Repairs costs $Answer

$26000$

$Answer

$Answer

New Machine cost $Answer

$Answer

$205000$

$Answer

Sale of Old Machine $Answer

$Answer

$Answer

Total Costs $Answer

$Answer

$Answer

b$)$ Should Manuco repair or replace its manufacturing equipment? Answer

Replace