Brief Exercise 20-7 Bryant Company has a factory machine with a book value of $8

Question

Brief Exercise 20-7 Bryant Company has a factory machine with a book value of $85,900 and a remaining useful life of 6 years. It can be sold for $28,900. A new machine is available at a cost of $387,600. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $614,400 to $566,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. 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 .
Brief Exercise 20-7 Bryant Company has a factory machine with a book value of $85,900 and a remaining useful life of 6 years. It can be sold for $28,900. A new machine is available at a cost of $387,600. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $614,400 to $566,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Retain Net Income Replace Equipment Increase (Decrease) Variable manufacturing costs New machine cost Sell old machine Total The old factory machine should be Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Retain Equipment Replace Equipment Net Income Annual x 6Yrs Annual x 6Yrs Increase (Decrease) Variable manufacturing costs $     3,686,400 $    3,397,200 $     289,200 New machine cost            387,600       (387,600) Sell old machine            (28,900)           28,900     Total $     3,686,400 $    3,755,900 $     (69,500) The old factory machine should be retained.

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