Tanner Company has old equipment with a book value of $150,000 and a remaining five-year useful life. Tanner is considering purchasing new equipment at a price of $180,000. Tanner can sell the old equipment now for $120,000. The old equipment has variable manufacturing costs of $66,000 per year. The new equipment will reduce variable manufacturing costs by $26,000 per year over its five-year useful life. The total increase or decrease in net income by replacing the old equipment with the new equipment is:

Granfield Company has a plece of manufocturing equipment with a book value of $40,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $120,000 and receive $22,000 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $39.000 per year. The new equipment will reduce variable manufacturing costs by $19,000 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is: Multiple Choice $22.000 decrease 518.000 decrease $22,000 increase $52.000 increase 576.000 increase