1. Kobe Company has a factory machine with a book value of $88,520 and a remaining useful life of 5 years. It can be sold for $25,550. A new machine is available at a cost of $246,830. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $745,420 to $622,620. Prepare an analysis showing whether the old machine should be retained or replaced. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Replace Equipment Net 5-Year Income Increase (Decrease) Variable manufacturing costs for 5 years $ $ $ New machine cost Sell old machine Total $ $ $ The old factory machine should be (retained or replaced)? 2. Rubble Company must decide whether to make or buy some of its components. The costs of producing 64,000 switches for its generators are as follows. Direct materials $30,700 Variable overhead $44,940 Direct labor $36,400 Fixed overhead $79,960 Instead of making the switches at an average cost of $3.00 ($192,000 64,000), the company has an opportunity to buy the switches at $2.67 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net Income Increase (Decrease) Direct materials $ $ $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $ $ $ Rubble Company will incur $_________________ of additional costs if it (makes/buys?) the switches. Would your answer be different if the released productive capacity will generate additional income of $43,157? (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net Income Increase (Decrease) Total Cost $ $ $ Opportunity cost Total cost $ $ $