Dinkins Inc

question 46

Multiple Choice

Dinkins Inc.is considering disposing of a machine with a book value of $50,000 and an estimated remaining life of five years.The old machine can be sold for $15,000.A new machine with a purchase price of $150,000 is being considered as a replacement.It will have a useful life of five years and no residual value.It is estimated that variable manufacturing costs will be reduced from $70,000 to $45,000 if the new machine is purchased.The net differential increase or decrease in cost for the entire five years for the new equipment is:

• A) $10,000 increase.
• B) $25,000 decrease.
• C) $10,000 decrease.
• D) $25,000 increase.