A company is considering replacing an old piece of machinery, which cost $597,700 and has $350,200 of accumulated depreciation to date, with a new machine that has a purchase price of $486,600. The old machine could be sold for $62,900.
The annual variable production costs associated with the old machine are estimated to be $156,300 per year for 8 years. The annual variable production costs for the new machine are estimated to be $99,300 per year for 8 years.
a. Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.