Dragoo Building Inc. has a crane with a book value of $242,000 and a 4-year remaining life. A new crane is available at a cost of $617,000. Dragoo can also receive $48,200 for trading in the old crane. The new crane will reduce variable costs by $145,200 per year over its four-year life. The total impact to Dragoo over the cranes four-year life is:

Multiple Choice

• Increase of $12,000.

• Increase of $23,000.

• Decrease of $12,000.

• Decrease of $617,000.

• Decrease of $48,200.