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What the five-year differential effect on profit

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Question 1: Starling Co. is considering disposing of a machine with a book value of $24,800 and estimated remaining life of five years. The old machine can be sold for $5,800. A new high-speed machine can be purchased at a cost of 66,200. 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 $23,200 to $19,300 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is a(n)

a. increase of $53,170

b. decrease of $53,170

c. decrease of $40,900

d. increase of $40,900

Reference no: EM132589884

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