Nighthawk Inc.is considering disposing of an old machine with a book value of $22,500 and an estimated remaining life of three years.The old machine can be sold for $6,250.A new machine with a purchase price of $68,750 is being considered a replacement.It will have a useful life of three years and no residual value.It is estimated that the annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased.The differential effect on income for the entire three years for the new machine is
A) $8,750 increase
B) $31,250 decrease
C) $8,750 decrease
D) $2,925 decrease

Question

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The Answer of Nighthawk Inc.is considering disposing of an old machine with a book value of $22,500 and an estimated remaining life of three years.The old machine can be sold for $6,250.A new machine with a purchase price of $68,750 is being considered a replacement.It will have a useful life of three years and no residual value.It is estimated that the annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased.The differential effect on income for the entire three years for the new machine is
A) $8,750 increase
B) $31,250 decrease
C) $8,750 decrease
D) $2,925 decrease