A machine with a book value of $61,300 has an estimated seven-year life. A propo

Question

A machine with a book value of $61,300 has an estimated seven-year life. A proposal is offered to sell the old machine for $23,500 and replace it with a new machine at a cost of $86,300. The new machine has a seven-year life with no residual value. The new machine would reduce annual direct labor costs by $10,500. Provide a differential analysis on the proposal to replace the machine. Enter all amounts as positive numbers.

Total differential decrease in labor cost $ Proceeds from sale of old equipment $ Cost of new equipment $ Net differential SelectincreasedecreaseItem 4 in cost from replacing equipment, seven-year total

Explanation / Answer

Particulars Amount Remarks Total differential decrease in labor cost $    73,500 ($ 10,500 p.a. for 7 years) Proceeds from sale of old equipment $    23,500 Cost of new equipment $    86,300 Net differential decrease in cost from replacing equipment    10,700

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.