Question
Ivanhoe Company has a factory machine with a book value of $ 86,300 and a remaining useful life of 7 years. It can be sold
Ivanhoe Company has a factory machine with a book value of $ 86,300 and a remaining useful life of 7 years. It can be sold for $ 33,500. A new machine is available at a cost of $ 359,000. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $ 623,300 to $ 461,800. 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 Equipment | Replace Equipment | Net Income Increase (Decrease) | |||||
---|---|---|---|---|---|---|---|
Variable manufacturing costs | $ enter a dollar amount | $ enter a dollar amount | $ enter a dollar amount | ||||
New machine cost | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
Sell old machine | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
Total | $ enter a total amount | $ enter a total amount | $ enter a total amount |
The old factory machine should be select an option replacedretained. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started