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katrin [286]
4 years ago
15

Granfield Company has a piece of manufacturing equipment with a book value of $35,500 and a remaining useful life of four years.

At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,100. Granfield can purchase a new machine for $111,000 and receive $21,100 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,100 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:a. $17,500 increaseb. $72,400 decreasec. $14,400 decreased. $48,850 increasee. $17,500 decrease
Business
1 answer:
Doss [256]4 years ago
7 0

Answer: Option (e) is correct.

Explanation:

Given that,

Book value of manufacturing equipment = $35,500

Current market value of equipment = $21,100

Cost of new machine = $111,000

cash received from trading old machine = $21,100

Variable manufacturing costs of new machine reduce by $18,100 per year over the four-year =

Total increase/decrease in net income = Cost of new machine + cash received from trading old machine + Reduction in Variable manufacturing costs

                                                =  ($111,000) + $21,100 + $18,100 × 4

                                                = ($17,500)

Note: Bracket represents the negative values.

∴ The total decrease in net income by replacing the current machine with the new machine is $17,500.

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Potential entrants refers to the risk of new entrants in the market.

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Answer:

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Explanation:

For calculation, following things need to be considered which is shown below:

1. Product A process costing = Pounds × Per pound price

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