Blossom Company has a machine that affixes labels to bottles. The machine has a book value of $81,600 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $306,000 that will have a 3-year useful life with no salvage value. The new machine will lower annual variable production costs from $530,400 to $418,200. Prepare an analysis showing whether the old machine should be retained or replaced. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g.(45).) Variable manufacturing costs New machine cost Net savings over 3 years $ Retain Equipment $ Replace Equipment $ Net Income Change
Blossom Company has a machine that affixes labels to bottles. The machine has a book value of $81,600 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $306,000 that will have a 3-year useful life with no salvage value. The new machine will lower annual variable production costs from $530,400 to $418,200. Prepare an analysis showing whether the old machine should be retained or replaced. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g.(45).) Variable manufacturing costs New machine cost Net savings over 3 years $ Retain Equipment $ Replace Equipment $ Net Income Change
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Blossom Company has a machine that affixes labels to bottles. The machine has a book value of $81,600 and a remaining useful life of
3 years and no salvage value. A new, more efficient machine is available at a cost of $306,000 that will have a 3-year useful life with no
salvage value. The new machine will lower annual variable production costs from $530,400 to $418,200.
Prepare an analysis showing whether the old machine should be retained or replaced. (Enter negative amounts using either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45).)
Variable manufacturing costs
New machine cost
Net savings over 3 years
$
Retain Equipment
$
Replace Equipment
$
Net Income Change
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