Pharoah Company has a factory machine with a book value of $90.800 and a remaining useful life of 7 years. It can be sold for $27.200.A new machine is available at a cost of $407 400. This machine will have a 7-year useful life with no salvage value. The new machinewill lower annual variable manufacturing costs from $640,100 to $581.800 Prepare an analysis showing whether the old machineshould be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negativeamounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts usingeither a negative sign preceding the number eg. -45 or parentheses eg. (45))Variable manufacturing costsNew machine costSell old machineTotalSThe old factory machine should beRetainEquipment$ReplaceEquipment$$Net IncomeIncrease (Decrease)

DIFFERENTIAL ANALYSISDifferential analysis is a decision-making method that examines the net effects…

Answered: Pharoah Company has a factory machine…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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