Bryant Company has a factory machine with a book value of $93,700 and a remainin

Question

Bryant Company has a factory machine with a book value of $93,700 and a remaining useful life of 7 years. It can be sold for $34,700. A new machine is available at a cost of $378,500. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $605,900 to $457,900. Prepare an analysis showing whether the old machine should be retained or replaced. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Replace Equipment Net Income Increase (Decrease) Variable manufacturing costs $ $ $ New machine cost Sell old machine Total $ $ $ The old factory machine should be .

Explanation / Answer

Answer:

The old machine should be replaced.

Retain equipment Replace equipment Net 7- year Income Increase (decrease) Variable manufacturing cost 4241300 3205300 1036000 sell old machine 34700 0 34700 New machine cost 0 378500 -378500 Total 4276000 3583800 692200

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