Reference no: EM132691856

ABC Co. has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $300,000 that will have a 5-year useful life with no salvage value. The new machine will lower annual variable production costs from $520,000 to $410,000.

Problem 1: ABC Co. has determined that the net savings over 3 years to replace the machine will be:

Select one:

a. A gain of $30,000
b. A loss of $110,000
c. A loss of $30,000
d. A gain of $110,000