Elmdale Company has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $300,000 that will have a 5-year useful life with no salvage value. The new machine will lower annual variable production costs from $520,000 to $410,000. 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).)     Retain Equipment   Replace Equipment   Net Income Change    New machine costVariable manufacturing costsFixed manufacturing costsNet savings over 3 years   $     $     $      Variable manufacturing costsNet savings over 3 yearsFixed manufacturing costsNew machine cost                Net savings over 3 yearsVariable manufacturing costsNew machine costFixed manufacturing costs

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Elmdale Company has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $300,000 that will have a 5-year useful life with no salvage value. The new machine will lower annual variable production costs from $520,000 to $410,000.

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).)

    Retain Equipment
  Replace Equipment
  Net Income Change
 
 New machine costVariable manufacturing costsFixed manufacturing costsNet savings over 3 years
  $
 
  $
 
  $
 
 
 Variable manufacturing costsNet savings over 3 yearsFixed manufacturing costsNew machine cost
 
 
 
 
 
 
 
 Net savings over 3 yearsVariable manufacturing costsNew machine costFixed manufacturing costs
          $
 
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