Question

Multiple Choice Question 148 Vaughn Manufacturing is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine Nen Mechine $710000 $376000 Price -0- Accumuleted Depreciation 112800 Remaining useful life 10 years -0- 10 years Useful life -0- $225600 Annual operating costs $300800 If the old machine is replaced, it can be sold for $36000. The company uses straight-line depreciation with a zero salvage value for all of its assets. The net advantage (disadvantage) of replacing the old machine is $75200 $39200 O $334000 $78000

Answer 1

А В 1 Net advantage (disadvantage): $300,800 2 Annual operating cost for old machine 3 Annual operating cost for new machine 4 Saving in annual operating cost 5 Useful life (years) 6 Total savings $225,600 $75,200 10 S752,000 7 Add: Sales price of old machine 8 Less: Cost of new machine 9 Net advantage (disadvantage) 10 Thus, the correct option is '$78,000' $36,000 $710,000 $78,000 Calculations are shown below В 1 Net advantage (disadvantage): 2 Annual operating cost for old machine 3 Annual operating cost for new machine 4 Saving in annual operating cost 5 Useful life (years) 6 Total savings 300800 225600 =B2-B3 10 =B4* B5 36000 710000 -B6+B7-B8 7 Add: Sales price of old machine 8 Less: Cost of new machine 9 Net advantage (disadvantage) 10 Thus, the correct option is '$78,000'.