Solution and Explanation:
Particulars Continue with Replace Differential impact
old machine old machine on income
Revenues:
Proceeds from
sale of old machine $29700 $29700
Cost:
Purchase price $(119700) $(119700)
Annual manufacturing
costs ( 6 Years) $(141600) $(41400) $100200
Income / (Loss) $(141600) $( 311400) $10200
Therefore, the proporsal must be accepted the proposal is earning with an increase in earning of $10200
2. The quality that the new machine can produce is very important.
2.a Though $10200 for six years is a income but it is not good income. Therefore, the fund which is used to purchase new machine can be think of using for other alternative.