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 life $89,000 Annual depreciation (straight-line) 8,900 Annual manufacturing costs, excluding depreciation 23,600 Annual non-manufacturing operating expenses 6,100 Annual revenue 74,200 Current estimated selling price of machine 29,700
New Machine
Purchase price of machine, six-year life $119,700 Annual depreciation (straight-line) 19,950 Estimated annual manufacturing costs, excluding depreciation 6,900
Annual non-manufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Required: 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 The difference between the differential revenue and the differential costs.
that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. 2. List other factors that should be considered before a final decision is reached.
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
The difference between the differential revenue and the differential costs.
that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
Question not attempted.
Differential Analysis
Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2)
April 30
1
Continue with Old Machine
Replace Old Machine
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
4
5
6
7
8
Solution
Differential Analysis
Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2)
April 30
1
Continue with Old Machine
Replace Old Machine
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
4
5
6
7
8
I can't seem to get the correct answer what am I missing?
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 life | $89,000 |
Annual depreciation (straight-line) | 8,900 |
Annual manufacturing costs, excluding depreciation | 23,600 |
Annual non-manufacturing operating expenses | 6,100 |
Annual revenue | 74,200 |
Current estimated selling price of machine | 29,700 |
New Machine | |
---|---|
Purchase price of machine, six-year life | $119,700 |
Annual depreciation (straight-line) | 19,950 |
Estimated annual manufacturing costs, excluding depreciation | 6,900 |
Annual non-manufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 The difference between the differential revenue and the differential costs. that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. | List other factors that should be considered before a final decision is reached. 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 The difference between the differential revenue and the differential costs. that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. Question not attempted.
Solution
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