Brief Exercise 20-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,500 and a remaining useful life of 6 years. It can be sold for $30,600. A new machine is available at a cost of $534,000. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $556,800 to $480,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. 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 Sell old machine Total Retain Equipment The old factory machine should be 556800 556800 retained + Replace Equipment 480200 534000 -30600 983600 Net Income Increase (Decrease) 76600 -534000 30600 -426800

Brief Exercise 20-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,500 and a remaining useful life of 6 years. It can be sold for $30,600. A new machine is available at a cost of $534,000. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $556,800 to $480,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. 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 Sell old machine Total Retain Equipment The old factory machine should be 556800 556800 retained + Replace Equipment 480200 534000 -30600 983600 Net Income Increase (Decrease) 76600 -534000 30600 -426800

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Janko Wellspring Incorporated has a pump with a book value of $26,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $47,000. Janko can receive $8,200 for trading in the old pump. The old machine has variable manufacturing costs of $27,000 per year. The new pump will reduce variable costs by $11,100 per year over its four-year life. Should the pump be replaced? Multiple Choice No, because the company will be $5,600 worse off in total. Yes, because income will increase by $5.500 per year No, because income wit decrease by $100 per year. Yes, because income will increase by $5.600 in total No, Janko will record a loss of $16,400 r they replace the pump
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A manufacturing company plans to renew production machinery to save on manufacturing costs. The unit selling price is 9 TL/ton, and the contribution margin is 3 TL/ton. The monthly total fixed cost, not including depreciation, is 6.000 TL. Q5: The company expects to save on variable costs by renewing the machine. The cost of the new machine is 90.000 TL, and the economic life is five years. The expected unit variable cost is 5 TL/ton. The company computes the depreciation cost based on the Straight Line Method. The minimum expected return of the investment is 2%. a) Compute the monthly breakeven point for the new machine b) The expected annual demand for production is 35.000 tons for the following five years. Should the company invest and why?
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