Question
Starling Co. is considering disposing of a machine with a book value of $23,900 and estimated remaining life of five years. The old machine can
Starling Co. is considering disposing of a machine with a book value of $23,900 and estimated remaining life of five years. The old machine can be sold for $5,500. A new high-speed machine can be purchased at a cost of 69,800. 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 $19,900 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is
a. increase of $64,090
b. increase of $49,300
c. decrease of $49,300
d. decrease of $64,090
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