Financial and Managerial Accounting: P24-2A Quebec Printing Company is considering replacing

Financial and Managerial Accounting 

PROBLEM 24-2A Differential analysis report for machine replacement proposal 
Quebec 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 360,000 
Annual depreciation (straight-line) 36,000 
Annual manufacturing costs, excluding depreciation 325,000 
Annual nonmanufacturing operating expenses 215,000 
Annual revenue 740,000 
Current estimated selling price of machine 210,000 

New Machine: 
Cost of machine, 6-year life 410,000 
Annual depreciation (straight-line) 68,333 
Annual manufacturing costs, excluding depreciation 284,000 

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. 
1. Prepare a differential analysis report as of October 13, 2008 of the current year, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the total differential income that would result over the 6-year period if the new machine is acquired. 
2. List other factors that should be considered before a final decision is reached.
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