Question

Bryant Company has a factory machine with a book value of $90,800 and a remaining useful life of 7 years. It can be sold for $27,200. A new machine is available at a cost of $407,400. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $640,100 to $581,800. 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.g. -45 or parentheses e.g. (45).)

		Retain Equipment		Replace Equipment		Net Income Increase (Decrease)
Variable manufacturing costs		$enter the variable manufacturing costs in dollars		$enter the variable manufacturing costs in dollars		$enter the variable manufacturing costs in dollars
New machine cost		enter the cost of the new machine		enter the cost of the new machine		enter the cost of the new machine
Sell old 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
Total		$enter a total amount		$enter a total amount		$enter a total amount

Answer 1

	Retain Equipment	Replace Equipment	Net Income Increase (Decrease)
Variable manufacturing costs	4,480,700	4,072,600	408,100
New machine cost	-	407,400	(407,400)
Sell old machine	-	(27,200)	27,200
Total	4,480,700	4,452,800	27,900