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 $47,000 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 $ 123,000 19,000 Machine B $ 136,000 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? Answer is not complete. Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should be indicated with a minus sign.) Machine A: Keep or Replace Analysis Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Keep Replace Income Increase (Decrease) from Replacing $ 59,000 $ 0 $ 59,000 $ 59,000 Req A Req B >
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 $47,000 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 $ 123,000 19,000 Machine B $ 136,000 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? Answer is not complete. Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should be indicated with a minus sign.) Machine A: Keep or Replace Analysis Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Keep Replace Income Increase (Decrease) from Replacing $ 59,000 $ 0 $ 59,000 $ 59,000 Req A Req B >
Chapter10: Project Cash Flows And Risk
Section: Chapter Questions
Problem 13PROB
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Transcribed Image Text: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 $47,000 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
$ 123,000
19,000
Machine B
$ 136,000
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?
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Req A
Req B
Req C and D
Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should
be indicated with a minus sign.)
Machine A: Keep or Replace
Analysis
Revenues
Sale of existing machine
Costs
Purchase of new machine
Variable manufacturing costs
Income (loss)
Keep
Replace
Income Increase
(Decrease) from
Replacing
$
59,000
$
0
$ 59,000
$
59,000
Req A
Req B >
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