Differential Analysis for Machine Replacement Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $60,000, the accumulated depreciation is $24,000, its remaining useful life is five years, and its residual value is negligible. On May 4 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 $180,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $205,000 $205,000 Direct materials $72,000 $72,000 Direct labor 51,000 — Power and maintenance 5,000 18,000 Taxes, insurance, etc. 1,500 4,000 Selling and administrative expenses 45,000 45,000 Total expenses $174,500 $139,000 a.Prepare a differential analysis dated May 4 to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. 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) May 4 Continuewith OldMachine(Alternative 1) ReplaceOldMachine(Alternative 2) DifferentialEffecton Income(Alternative 2) Revenues: Sales (5 years) $fill in the blank f2a38dfe0fe7fde_1 $fill in the blank f2a38dfe0fe7fde_2 $fill in the blank f2a38dfe0fe7fde_3 Costs: Purchase price fill in the blank f2a38dfe0fe7fde_4 fill in the blank f2a38dfe0fe7fde_5 fill in the blank f2a38dfe0fe7fde_6 Direct materials (5 years) fill in the blank f2a38dfe0fe7fde_7 fill in the blank f2a38dfe0fe7fde_8 fill in the blank f2a38dfe0fe7fde_9 Direct labor (5 years) fill in the blank f2a38dfe0fe7fde_10 fill in the blank f2a38dfe0fe7fde_11 fill in the blank f2a38dfe0fe7fde_12 Power and maintenance (5 years) fill in the blank f2a38dfe0fe7fde_13 fill in the blank f2a38dfe0fe7fde_14 fill in the blank f2a38dfe0fe7fde_15 Taxes, insurance, etc. (5 years) fill in the blank f2a38dfe0fe7fde_16 fill in the blank f2a38dfe0fe7fde_17 fill in the blank f2a38dfe0fe7fde_18 Selling and admin. expenses (5 years) fill in the blank f2a38dfe0fe7fde_19 fill in the blank f2a38dfe0fe7fde_20 fill in the blank f2a38dfe0fe7fde_21 Income (Loss) $fill in the blank f2a38dfe0fe7fde_22 $fill in the blank f2a38dfe0fe7fde_23 $fill in the blank f2a38dfe0fe7fde_24

Differential Analysis for Machine Replacement Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of...

Differential Analysis for Machine Replacement

Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $60,000, the accumulated depreciation is $24,000, its remaining useful life is five years, and its residual value is negligible. On May 4 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 $180,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations:

	Present Operations	Proposed Operations
Sales	$205,000	$205,000
Direct materials	$72,000	$72,000
Direct labor	51,000	—
Power and maintenance	5,000	18,000
Taxes, insurance, etc.	1,500	4,000
Selling and administrative expenses	45,000	45,000
Total expenses	$174,500	$139,000

a.Prepare a differential analysis dated May 4 to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. 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)
May 4
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues:
Sales (5 years)	$fill in the blank f2a38dfe0fe7fde_1	$fill in the blank f2a38dfe0fe7fde_2	$fill in the blank f2a38dfe0fe7fde_3
Costs:
Purchase price	fill in the blank f2a38dfe0fe7fde_4	fill in the blank f2a38dfe0fe7fde_5	fill in the blank f2a38dfe0fe7fde_6
Direct materials (5 years)	fill in the blank f2a38dfe0fe7fde_7	fill in the blank f2a38dfe0fe7fde_8	fill in the blank f2a38dfe0fe7fde_9
Direct labor (5 years)	fill in the blank f2a38dfe0fe7fde_10	fill in the blank f2a38dfe0fe7fde_11	fill in the blank f2a38dfe0fe7fde_12
Power and maintenance (5 years)	fill in the blank f2a38dfe0fe7fde_13	fill in the blank f2a38dfe0fe7fde_14	fill in the blank f2a38dfe0fe7fde_15
Taxes, insurance, etc. (5 years)	fill in the blank f2a38dfe0fe7fde_16	fill in the blank f2a38dfe0fe7fde_17	fill in the blank f2a38dfe0fe7fde_18
Selling and admin. expenses (5 years)	fill in the blank f2a38dfe0fe7fde_19	fill in the blank f2a38dfe0fe7fde_20	fill in the blank f2a38dfe0fe7fde_21
Income (Loss)	$fill in the blank f2a38dfe0fe7fde_22	$fill in the blank f2a38dfe0fe7fde_23	$fill in the blank f2a38dfe0fe7fde_24

Jun 10, 2022

SOLUTION.PDF

Differential Analysis for Machine Replacement Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of...

Get Answer To This Question

Related Questions & Answers

Submit New Assignment