13. Rocko Inc. has a machine with a book value of $50,000 and a five-year remaining life. A new machine is available at a cost of $85,000 arld Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year life. Should the machine be replaced? a) Yes, because income will increase by $14,000 per year. b) Yes, because income will increase by $23,000 in total. c) No, because the company will be $23,000 worse off in total. d) No, because the income will decrease by $14,000 per year e) Rocko will be not be better or worse off by replacing the machine. 14. A company expects to produce and sell 15,000 units of a single product. Management desires a 15% return on assets (ROA) of $2,000,000. The following additional company information is available Variable costs (per unit) Production costs $65 $7 Nonproduction costs Fixed costs (in total) Overhead Nonproduction $97,000 $23,000 Compute selling price per unit given the above information and your knowledge of ROA. a) $80 b) $100 c) $20 d) $72 e) $92 15, Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available Per Unit Costs at 75% capacity: Total $1,260,000 Direct materials Direct labor Overhead (fixed and variable) Totals $12.00 9 15 $36.00 945,000 1,575,000 $3,780,000 In producing 20,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred. What is the effect on income if Wade accepts this order? a) Income will decrease by $4 per unit. b) Income will increase by $4 per unit. Income will increase by $5 per unit. c) d) Income will decrease by $5 per unit. e) Income will increase by $11 per unit