Question
Starling Co. is considering disposing of a machine with a book value of $21,100 and estimated remaining life of five years. The old machine can
Starling Co. is considering disposing of a machine with a book value of $21,100 and estimated remaining life of five years. The old machine can be sold for $5,000. A new high-speed machine can be purchased at a cost of $65,400. 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 $23,400 to $20,800 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is a(n)
a.increase of $61,620
b.decrease of $47,400
c.decrease of $61,620
d.increase of $47,400
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