Solution 1): Preparation of Differential Analysis
Old Machine |
New Machine |
Differential Income |
|
Alt.1 |
Alt.2 |
||
Revenues |
95,000.00 |
95,000.00 |
- |
Costs: |
|||
Annual Depreciation |
10,800.00 |
23,000.00 |
-12,200.00 |
Annual Manufacturing Cost |
38,600.00 |
18,200.00 |
20,400.00 |
Annual Non-Manufacturing Expenses |
12,300.00 |
12,300.00 |
- |
Total Cost |
61,700.00 |
53,500.00 |
8,200.00 |
Income (Loss) |
33,300.00 |
41,500.00 |
8,200.00 |
Solution 2) As the Net Income of the company is increasing by $8,200, company go with Alternative 2 that is purchasing new machine.
:Following are some of the factors company should consider while making a decision:
Staff Motivation: The staff should be motivated to switch over to the new machine and technology
Customer’s satisfaction. The satisfaction that the customers has to be considered
Availability of manpower. The company needs to make sure that there is enough manpower to operate the new machine
Solution 3) Cost of the New Machine = $138,000
Less: Selling Price of Old Machine = $35,900
Amount available for Investment = $102,100
Return generated on the investment = 5/100 x 102,100 = $5,105 per year
As the return generated on the investment is less than the Income generated by new machine, the company should go with alternative 2 that is purchasing new machine.
please help and expain i have a final thank you. Differential Analysis Practice Quiz replacing a machine that has be...
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