Bryant Company has a factory machine with a book value of 93

Bryant Company has a factory machine with a book value of $93,000 and a remaining useful life of 5 years. It can be sold for $33,400. A new machine is available at a cost of $363,600. This machine will have a 5-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $562,100 to $610,700. 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).) Retain EquipmentEquipment Increase (Decrease) Replace Net Income Variable manufacturing costs New machine cost Sell old machine g Total The old factory machine should be

Solution

Retain Replace Net Income Inc/Decrease Variable Manufacturing cost 2810500 3053500 -243000 New machine cost 0 363600 -363600 Sell old machine 0 -33400 33400 Total cost 2810500 3383700 -573200 The decision should be to Retain the machine.