| Brief Exercise 23 6 |
 |
Ridley Company has a factory machine with a book value of $92,500and a remaining useful life of5years. A new machine is available at a cost of $191,300. This machine will have a5 year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $629,300to $351,400.
Prepare an analysis showing whether the old machine should be retained or replaced.
(If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. 15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)
| Retain Equipment |
Replace Equipment |
Net5 Year Income Increase (Decrease) |
||||
| Variable manufacturing costs | $ |
$ |
$ |
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| New machine cost | |
|
|
|||
| Total | $ |
$ |
$ |
| The old factory machine should bereplacedretained. |