Question
Starling Co. is considering disposing of a machine with a book value of $20,500 and estimated remaining life of five years. The old machine can
Starling Co. is considering disposing of a machine with a book value of $20,500 and estimated remaining life of five years. The old machine can be sold for $5,800. A new high-speed machine can be purchased at a cost of 73,100. 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 $22,900 to $20,400 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is
a.decrease of $71,240
b.decrease of $54,800
c.increase of $54,800
d.increase of $71,240
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