Question

Bryant Company has a factory machine with a book value of $85,100 and a remaining useful life of 7 years. It can be sold for $25,200. A new machine is available at a cost of $394,100. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $647,000 to $483,700. 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).)

		enter the variable manufacturing costs in dollars		enter the variable manufacturing costs in dollars		enter the variable manufacturing costs in dollars
		enter the cost of the new machine		enter the cost of the new machine		enter the cost of the new machine
		enter the proceeds from the sale of the old machine		enter the proceeds from the sale of the old machine		enter the proceeds from the sale of the old machine
		enter a total amount		enter a total amount		enter a total amount

select an option                                                          replacedretained

Answer 1

	Retain	Replace
Variable Manufacturing cost	4,529,000	3,385,900	1,143,100
New machine cost	-	394,100	-394,100
Sell old machine	-	-25,200	25,200
Total amount	4,529,000	3,754,800	774,200

The machine should be replaced