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A company is considering replacing an old machine that was originally purchased at a cost of $420,000 and has an accumulated depreciation of $280,000, with a new machine that costs $650,000. The old machine can be sold for $127,000. The annual variable costs to operate the old machine are estimated to be $240,000 for 5 years. In comparison, the estimated annual variable costs of the new machine are $140,000 for 5 years. What is the net increase or decrease in cost for the entire 5 years if the equipment is purchased? cost increase of $23,000 cost decrease of $10,000 cost decrease of $23,000 cost increase of $10,000

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Answer: C : Cost decrease of $23,000

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