$12$

Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $$48,000$ and a remaining useful life of four years. It can be sold now for $$58,000.$ 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 four years.

$\backslash$table$[[,$Machine A$,$Machine B$],[$Purchase price,$$121,000,$$ $135,000],[$Variable manufacturing costs per,$19,000,15,000]]$

$($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?

Complete this question by entering your answers in the tabs below.

Req C and D

Compute the income increase or decrease from replacing the old machine with Machine A$.$

Note: Amounts to be deducted should be indicated with a minus sign.

$\backslash$table$[[$Machine A: Keep or Replace Analysis,Keep,Replace,$\backslash$table$[[$Income Increase$],[($Decrease$)$ from$],[$Replacing$]]],[$Revenues$,,,],[$Sale of existing machine,,,$],[$Costs$,,,],[$Purchase of new machine,,,$],[$Variable manufacturing costs,,,$]]$