Starling Co. is considering disposing of a machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased at a cost of $25,000. 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 $26,000 to $23,500 if the new machine is purchased. The total net differential increase or decrease in income for the new
equipment for the entire five years is
Oa. decrease of S11,000
Ob. increase of $15,000
Oc decrease of S15,000
Od. increase of $11,000