Question

CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Brief Exercise 20-07 Bryant Company has a factory machine with a book value of $94,300 and a remaining useful life of 8 years. It can be sold for $28,500. A new machine is available at a cost of $327,000. This machine will have a 8-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $551,200 to $504,800. 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.o. -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 LINK TO TEXT By accessing this question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.

Answer 1

	Retain Equipment	Replace Equipment	Net Income Increase (Decrease)
Variable manufacturing costs	(551200*8)= $4409600	(504800*8)= $4038400	$371200
New machine cost	0	327000	-327000
Sell old machine	0	-28500	28500
Total	$4409600	$4336900	$72700

The old factory machine should be replaced. As the total cost of machine is less when it is replaced than retaining the machine. So, the old factory machine must be replaced.