Ask Question
7 October, 01:46

Charlie Corporation is considering buying a new donut maker. This machine will replace an old donut maker that still has a useful life of 6 years. The new machine will cost $3,730 a year to operate, as opposed to the old machine, which costs $4,125 per year to operate. Also, because of increased capacity, an additional 21,300 donuts a year can be produced. The company makes a contribution margin of $0.10 per donut. The old machine can be sold for $8,300 and the new machine costs $31,300. The incremental annual net cash inflows provided by the new machine would be (Ignore income taxes.) :

+3
Answers (1)
  1. 7 October, 01:59
    0
    The incremental annual net cash inflows provided by the new machine would be $2,525.

    Explanation:

    In order to calculate the incremental annual net cash inflows provided by the new machine we would have to use the following formula:

    incremental annual net cash inflows=saving in annual operating cost+contribution earned on additional sales

    = ($4,125-$3,730) + (21,300*$0.10)

    =$395+$2,130

    =$2,525

    Hence, The incremental annual net cash inflows provided by the new machine would be $2,525.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Charlie Corporation is considering buying a new donut maker. This machine will replace an old donut maker that still has a useful life of 6 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers