PR25-2A

Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:

OLD MACHINE

Cost of machine, 10-year life89000

Annual depreciation (straight-line) 8900

Annual manufacturing costs, excluding depreciation 23600

Annual nonmanufacturing operating expenses 6100

Annual revenue 74200

Current estimated selling price of machine29700

New Machine

Purchase price of machine, six-year life119700

Annual depreciation (straight-line) 19950

Estimated annual manufacturing costs, excluding depreciation 69000

Purchase price of machine, six-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, excluding depreciation

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

1. Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired.

2.List other factors that should be considered before a final decision is reached.