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Find the differential effect on income for the new machine

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Problem - Starling Co. is considering disposing of a machine with a book value of $23,700 and estimated remaining life of five years. The old machine can be sold for $5,600. A new high-speed machine can be purchased at a cost of 74,300. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $22,900 to $19,200 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is

1. increase of $65,260

2. decrease of $65,260

3. increase of $50,200

4. decrease of $50,200

Reference no: EM131601109

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