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Differential Analysis for Machine Replacement Ridgeway Digital Components Company assembles circuit boards by using...

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Accounting

Differential Analysis for Machine Replacement
Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $200,000, the accumulated depreciation is $50,000, its remaining useful life is 6 years, and its residual value is negligible. On October 1 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 $500,000. The automatic machine has an estimated useful life of 6 years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on present and proposed operations:
\table[[,\table[[Present],[Operations]],\table[[Proposed],[Operations]]],[Sales,$400,000,$400,000
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