Multiple Choice
Nighthawk Inc. is considering disposing of an old machine with a book value of $22,500 and an estimated remaining life of three years. The old machine can be sold for $6,250. A new machine with a purchase price of $68,750 is being considered as a replacement. It will have a useful life of three years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased. The differential effect on income for the entire three years for the new machine is a (n)
A) $8,750 increase
B) $31,250 decrease
C) $8,750 decrease
D) $2,925 decrease
Correct Answer:
Verified
Correct Answer:
Verified
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