Sunland Company has a factory machine with a book value of $156,000 and a remaining useful life of 5 years. A new machine is available at a cost of $247,500. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $590,500 to $501,000. Prepare an analysis that shows whether Sunland should retain or replace the old machine. (If an amount reduces the net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) Variable costs New machine cost $ $ Keep Equipment The old factory machine should be $ $ Replace Equipment $ $ Net Income Increase (Decrease)
Sunland Company has a factory machine with a book value of $156,000 and a remaining useful life of 5 years. A new machine is available at a cost of $247,500. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $590,500 to $501,000. Prepare an analysis that shows whether Sunland should retain or replace the old machine. (If an amount reduces the net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) Variable costs New machine cost $ $ Keep Equipment The old factory machine should be $ $ Replace Equipment $ $ Net Income Increase (Decrease)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Sunland Company has a factory machine with a book value of $156,000 and a remaining useful life of 5 years. A new machine is
available at a cost of $247,500. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual
variable manufacturing costs from $590,500 to $501,000.
Prepare an analysis that shows whether Sunland should retain or replace the old machine. (If an amount reduces the net income then
enter with a negative sign preceding the number or parenthesis, e.g.-15,000, (15,000).)
Variable costs
New machine cost
$
$
Keep
Equipment
The old factory machine should be
$
$
Replace
Equipment
$
$
Net Income
Increase
(Decrease)
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