4

Starling Co. is considering disposing of a machine with a book value of $24,200 and estimated remaining life of five years. The old machine can be sold for $5,600. A new high-speed machine can be purchased at a cost of $65,200. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $23,000 to $19,900 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is a(n)

a. increase of $44,100

b. increase of $57,330

c. decrease of $57,330

d. decrease of $44,100