The Sloan Corporation is considering the purchase of a new factory machine at a cost of $30,000. The machine would perform a function that is now being performed by hand. The new machine would have a life of five years and would produce 5,000 units a year (the current output). Direct labor costs would be reduced by $1.10 a unit. Variable overhead costs would be reduced by $0.35 a unit. Fixed costs, other than depreciation, would increase by $2,500 a year.
1. Should the machine be purchased?
2. What impact would the decision have on net income?

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The Answer of The Sloan Corporation is considering the purchase of a new factory machine at a cost of $30,000. The machine would perform a function that is now being performed by hand. The new machine would have a life of five years and would produce 5,000 units a year (the current output). Direct labor costs would be reduced by $1.10 a unit. Variable overhead costs would be reduced by $0.35 a unit. Fixed costs, other than depreciation, would increase by $2,500 a year.
1. Should the machine be purchased?
2. What impact would the decision have on net income?

The Sloan Corporation Is Considering the Purchase of a New