Western Company has a machine that affixes labels to bottles. The machine has a book value of $60000 and a remaining useful life of 3 years and no salvage value. A new more efficient machine is available at a cost of $210000 that will have a 5-year useful life with no salvage value. The new machine will lower annual variable production costs from $490000 to $390000.
Instructions
Prepare an analysis showing whether the old machine should be retained or replaced.

Question

Quizplus · Accepted Answer

The Answer of Western Company has a machine that affixes labels to bottles. The machine has a book value of $60000 and a remaining useful life of 3 years and no salvage value. A new more efficient machine is available at a cost of $210000 that will have a 5-year useful life with no salvage value. The new machine will lower annual variable production costs from $490000 to $390000.
Instructions
Prepare an analysis showing whether the old machine should be retained or replaced.

Western Company Has a Machine That Affixes Labels to Bottles