Replace Equipment

A machine with a book value of $$250,800$ has an estimated $6-$year life. A proposal is offered to sell the old machine for $$216,000$ and replace it with a new machine at a

cost of $$282,300.$ The new machine has a $6-$year life with no residual value. The new machine would reduce annual direct labor costs from $$50,600$ to $$40,500.$

Prepare a differential analysis dated October $3$ on whether to Continue with Old Machine $($Alternative $1)$ or Replace Old Machine $($Alternative $2).$ If an amount is zero,

enter $"0".$ For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis

Continue with Old Machine $($Alt$.1)$ or Replace Old Machine $($Alt$.2)$

April $11$

Revenues:

Proceeds from sale of old machine $

$,$$

$$,x$

X $q$

$ $x$

Costs:

Purchase price

Should the company continue with the old machine $($Alternative $1)$ or replace the old machine $($Alternative $2)?$