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Rory Company has an old machine with a book value of $79,000 and a remaining five-year useful life. Rory is considering purchasing new machine at a price of $108,000. Rory can sell its old machine now for $82,000. The old machine has variable manufacturing costs of $34,000 per year. The new machine will reduce variable manufacturing costs by $13,600 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.

Rory Company has an old machine with a book value of $79,000 and a remaining five-year useful life. Rory is considering purchasing new machine at a price of $108,000. Rory can sell its old machine now for $82,000. The old machine has variable manufacturing costs of $34,000 per year. The new machine will reduce variable manufacturing costs by $13,600 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.

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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Rory Company has an old machine with a book value of $79,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $108,000. Rory can sell its old machine now for $82,000. The old machine has variable manufacturing costs of $34,000 per year. The new machine will reduce variable manufacturing costs by $13,600 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. Keep or Replace Analysis Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) $ $ Keep 170,000 170,000 $ < Required A Replace 82,000 108,000 102,000 Income Increase (Decrease) if replaced Required B
Transcribed Image Text:Rory Company has an old machine with a book value of $79,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $108,000. Rory can sell its old machine now for $82,000. The old machine has variable manufacturing costs of $34,000 per year. The new machine will reduce variable manufacturing costs by $13,600 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. Keep or Replace Analysis Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) $ $ Keep 170,000 170,000 $ < Required A Replace 82,000 108,000 102,000 Income Increase (Decrease) if replaced Required B
(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 Should the old machine be replaced? Should the old machine be replaced? < Required A Required B >
Transcribed Image Text:(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 Should the old machine be replaced? Should the old machine be replaced? < Required A Required B >
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