Jeff coat Company is considering replacing a factory machine with a new machine.

Assessment of replacement of factory machine:

 

Old Machine

New Machine

Book Value

$ 40,000

 

Cost

 

$120,000

Remaining useful life

four years

four years

Salvage value

0

0

Variable manufacturing costs decrease from $160,000 to $125,000 if new machine purchased.

Prepare the incremental analysis for the four year period.