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ExtremeBDS [4]
3 years ago
6

QS 23-14 Keep or replace LO P5 Rory Company has a machine with a book value of $79,000 and a remaining five-year useful life. A

new machine is available at a cost of $118,500, and Rory can also receive $75,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $22,000 per year over its five-year useful life. Calculate the incremental income. (Any losses or outflows should be entered with a minus sign.)
Business
1 answer:
sertanlavr [38]3 years ago
5 0

Answer:

Incremental Income = $66,500

<u></u>

Explanation:

<u>Incremental Income from Replacing Machine</u>

Incremental Income from Replacing Machine   $110,000

(5 * $22,000)

Add: Salvage value of old machine                     <u>$75,000</u>

Total Income                                                          $185,000

Less: Acquisition Cost of New Machine               <u>$118,500</u>

Incremental Income                                              <u>$66,500</u>

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