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Exercise 23-10 (Algo) Keep or replace 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 four years. It can be sold now for $59,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Machine A $ 123,000 19,000 Machine B $ 137,000 14,000 (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 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 four years. It can be sold now for $59,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Machine A $ 123,000 19,000 Machine B $ 137,000 14,000 (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
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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15: 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 four years. It can be sold now for $59,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Req A (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? Complete this question by entering your answers in the tabs below. Req B Machine A $ 123,000 19,000 Req C and D Machine B $ 137,000 14,000
Transcribed Image Text:15: 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 four years. It can be sold now for $59,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Req A (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? Complete this question by entering your answers in the tabs below. Req B Machine A $ 123,000 19,000 Req C and D Machine B $ 137,000 14,000
Req A Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted sha indicated with a minus sign.) Revenues Machine A: Keep or Replace Analysis Req B Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Req A Req B Req C and D Revenues Sale of existing machine Costs lachine B: Keep or Replace Analysis Purchase of new machine Variable manufacturing costs Income (loss) Req A $ Keep Req C and D Req B < 0 $ $ Reg A Compute the income increase or decrease from replacing the old machine with Machine B. (Amounts t ndicated with a minus sign.) Keep Replace 0 $ < Req A Req C and D Income Increase (Decrease) from Replacing 0 $ Req B > (c) Should Lopez keep or replace its old machine? (d) Which new machine should Lopez purchase? Replace 0 Complete this question by entering your answers in the tabs below. Income Increase (Decrease) from Replacing 0 $ < Req B Req C and D > 0 (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Reg C and D
Transcribed Image Text:Req A Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted sha indicated with a minus sign.) Revenues Machine A: Keep or Replace Analysis Req B Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Req A Req B Req C and D Revenues Sale of existing machine Costs lachine B: Keep or Replace Analysis Purchase of new machine Variable manufacturing costs Income (loss) Req A $ Keep Req C and D Req B < 0 $ $ Reg A Compute the income increase or decrease from replacing the old machine with Machine B. (Amounts t ndicated with a minus sign.) Keep Replace 0 $ < Req A Req C and D Income Increase (Decrease) from Replacing 0 $ Req B > (c) Should Lopez keep or replace its old machine? (d) Which new machine should Lopez purchase? Replace 0 Complete this question by entering your answers in the tabs below. Income Increase (Decrease) from Replacing 0 $ < Req B Req C and D > 0 (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Reg C and D
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