Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and aremaining useful life of five years. It can be sold now for $52,000. Variable manufacturing costs are $36,000 per year for this oldmachine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is fiveyears.Purchase priceVariable manufacturing costs per year(a) Compute the income increase or decrease from replacing the old machine with Machine A.(b) Compute the income increase or decrease from replacing the old machine with Machine B.(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase?Req AComplete this question by entering your answers in the tabs below.Req BRevenuesMachine A: Keep or Replace AnalysisReq C and DCompute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deductedshould be indicated with a minus sign.)Sale of existing machineCostsPurchase of new machineVariable manufacturing costsIncome (loss)Machine A$ 115,00019,000$KeepMachine B$ 125,00015,0000 $< Req AReplaceIncome Increase(Decrease) fromReplacing0 $Req B >0

To make a decision, the incremental income from each machine is compared with the existing machine

Answered: h a minus sign.) ace Analysis e costs $…

Business

Accounting

h a minus sign.) ace Analysis e costs $ GA Keep 0 $ Replace Income Increase (Decrease) from Replacing 0 $ 0

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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