Acommercial oven with a book value of $67,000 has an estimated remaining 5 year life. a proposal is offered to sell the oven for $8,500 and replace it with a new oven costing $110,000. the new machine has a 5-year life with no residual value. the new machine would reduce annual maintenance costs by $23,000. provide a differential analysis on the proposal to replace the commercial oven. annual maintenance cost reduction $ number of years applicable total differential decrease in cost $ proceeds from sale of equipment $ cost of new equipment net differential decrease in cost from replacing equipment

It should replace the equipment

Explanation:

                                         continuereplaceDifferential

Proceeds from sale             -              8,500            8,500

Cost  

purchase                                -           -110,000        -110,000

cost savings (5 years)                           115,000         115,000

Total cost                                 -               5,000           5,000

Net                                                    -     13,500          13,500

88 because 4 plus 4 equals 8. 40 plus 40 equals 80. 80 plus 8 equals 88

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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