Exercise 23-10 (Algo) Keep or replace LO P5Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and aremaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $49,000 per year for this oldmachine, Information on two alternative replacement machines follows. The expected useful life of each replacement machine is fiveyears.Purchase priceVariable manufacturing costs per year(a) Compute the income increase or decrease from replacing the old machine with Machine A(b) Compute the income increase or decrease from replacing the old machine with Machine B.(c) Should Lopez keep or replace its old machine?(d) if the machine should be replaced, which new machine should Lopez purchase?Req AComplete this question by entering your answers in the tabs below.RevenuesMachine A: Keep or Replace AnalysisReq BCompute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should beindicated with a minus sign.)CostsSale of existing machinePurchase of new machineVariable manufacturing costsIncome (loss)Req ACostsReq C and DReq BMachine B: Keep or Replace AnalysisRevenuesSale of existing machinePurchase of new machineVariable manufacturing costsIncome (loss)Req C and DSComplete this question by entering your answers in the tabs below.$Machine A$ 125,00020,000Keep(KeepDCompute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should beindicated with a minus sign.)Machine B$ 137,00013,0000 $0 $< Req AReplaceReplace00 $Income Increase(Decrease) fromReplacingReq B >Income Increase(Decrease) fromReplacingReq C and D >00

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Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $49,000 per year for this old machine, Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase?

Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $49,000 per year for this old machine, Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase?

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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k Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $106,000. Rory can sell its old machine now for $73,000. The old machine has variable manufacturing costs of $32,000 per year. The new machine will reduce variable manufacturing costs by $12,800 per year over its five-year useful life. (a) Prepare a keep or replace analysis of income effects for the machines. (b) Should the old machine be replaced? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a keep or replace analysis of income effects for the machines. ces Keep or Replace Analysis Keep Revenues Sale of existing machine $ 0 Costs Purchase of new machine Variable manufacturing costs Income (loss) Replace Income Increase (Decrease) if replaced
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