Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine

is $$78,000,$ the accumulated depreciation is $$31,200,$ its remaining useful life is $5$ years, and its residual value is negligible. On October $1$ of the current year, a proposal

was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $$162,200.$ The automatic machine has an

estimated useful life of $5$ years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on

present and proposed operations:

a$.$ Prepare a differential analysis dated October $1$ to determine whether to continue with $($Alternative $1)$ or replace $($Alternative $2)$ the old machine. Prepare the analysis

over the useful life of the new machine. If an amount is zero, enter $"0".$ If required, use a minus sign to indicate a loss.

Differential Analysis

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

October $1$

Line Item Description

Continue with

Old Machine

Replace Old Machine

Differential Effects

$($Alternative $1)$

$($Alternative $2)$

$($Alternative $2)$

Revenues:a$.$ Prepare a differential analysis dated October $1$ to determine whether to continue with $($Alternative $1)$ or replace $($Alternative $2)$ the old machine. Prepare the analysis

over the useful life of the new machine. If an amount is zero, enter $"0".$ If required, use a minus sign to indicate a loss.

Differential Analysis

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

October $1$

b$.$ Based only on the data presented, should the proposal be accepted?

Should be accepted

c$.$ Differences in capacity between the two alternatives is

to consider before a final decision is made.