Brief Exercise 23-6 Ridley Company has a factory machine with a book value of $87,400and a remaining useful life of5years. A new machine is available at a cost of $203,700. This machine will have a5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $574,100to $377,100. Prepare an analysis showing whether the old machine should be retained or replaced.(If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g.-15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)

Retain Equipment	Replace Equipment	Net5-Year Income Increase (Decrease)
Variable manufacturing costs	$	$	$
New machine cost
Total	$	$	$

The old factory machine should bereplacedretained.

23-4

Vintech Manufacturing incurs unit costs of $6($5variable and $1fixed) in making a subassembly part for its finished product. A supplier offers to make17,300of the part at $6.10per unit. If the offer is accepted, Vintech will save all variable costs but no fixed costs.

Prepare an analysis showing the total cost saving, if any, Vintech will realize by buying the part.(If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g.-15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)

Make	Buy	Net Income Increase (Decrease)
Variable manufacturing costs	$	$	$
Fixed manufacturing costs
Purchase price
Total annual cost	$	$	$

The decision should be tobuy the partmake the part.