Charlie Corporation is considering buying a new donut maker. This machine will replace an olddonut maker that still has a useful life of 6 years. The new machine will cost $3,650 a year tooperate, as opposed to the old machine, which costs $3,925 per year to operate. Also, because ofincreased capacity, an additional 20,500 donuts a year can be produced. The company makes acontribution margin of $0.10 per donut. The old machine can be sold for $7,500 and the newmachine costs $30,500. The incremental annual net cash inflows provided by the new machinewould be (Ignore income taxes.): Multiple Choice $2,050 $275 $5,450 $2,325

The differential analysis is performed to compare the different alternatives available with the…

Answered: machine costs $30,500. The incremental…

machine costs $30,500. The incremental annual net cash inflows provided by the new machine would be (Ignore income taxes.): Multiple Choice $2,050 $275 $5,450 $2,325

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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Question

Charlie Corporation is considering buying a new donut maker. This machine will replace an old
donut maker that still has a useful life of 6 years. The new machine will cost $3,650 a year to
operate, as opposed to the old machine, which costs $3,925 per year to operate. Also, because of
increased capacity, an additional 20,500 donuts a year can be produced. The company makes a
contribution margin of $0.10 per donut. The old machine can be sold for $7,500 and the new
machine costs $30,500. The incremental annual net cash inflows provided by the new machine
would be (Ignore income taxes.): Multiple Choice $2,050 $275 $5,450 $2,325

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