Granfield Company has a piece of manufacturing equipment with a bock value of $3

ID: 2438419 • Letter: G

Question

Granfield Company has a piece of manufacturing equipment with a bock value of $36,000 and a remain ing useful lite ot four years At the end of the four vears the e value of the equipment is current S21,200 Granfield can purchase d ne v m ch e l 112 ??? and eceives2t200 n ret i ot ach in its old chir . The new $18.200 per year over the four-year ife of the new machine. The total increase cr decrease in net iruone by replacinig the cutrent mactarie with me new mach.ne hine The new machine wl reduce variable manufacturing costs by ioncring the tims value of money) 1s Mutiple Choice $18,000 increese 72800 decreaze $14.800 decresse 549.200 incraase $19,000 decreate

Explanation / Answer

Purchasing cost of new machine

$ 112,000

Less: Cash received by trading old machine

$ 21,200

Less: Cost savings in variable cost ( $ 18,200 x 4 years)

$ 72,800

Total decrease in net income

$ 18,000

Total decrease in net income by replacing current machine with new machine is $ 18,000.

Hence option “$ 18,000 decrease” is correct answer.