18 - Riener Hospital has an x-ray machine with a book value of $60,000 and a remaining useful life of three years. At the end of the three years the equipment will have a zero salvage value. The market value of the equipment is currently $32,000. Riener can purchase a new machine for $145,000 and receive $28,000 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $27,000 per year over the three-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:

Multiple Choice

• $22,000 decrease

• $76,000 increase

• $18,000 decrease

• $52,000 increase

• $22,000 increase

19 - Ahngram Corp. has 1,000 carton of oranges that cost $10 per carton in direct costs and $16.50 per carton in indirect costs and sold for $30 per carton. The oranges can be processed further into orange juice at an additional cost of $12.50 and sold at a price of $46. The incremental income (loss) from processing the oranges into orange juice would be:

• Multiple Choice

• $30,500.

• $22,500.

• ($30,500).

• $33,500.

• $23,500.

  20 - Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10; direct labor, $14, variable overhead $3 and fixed overhead, $8. An outside supplier has offered to sell the product to Paxton for $32. Compute the net incremental cost or savings of buying the component.

  Multiple Choice

• $5.00 savings per unit.

• $3.00 cost per unit.

• $0 cost or savings per unit.

• $5.00 cost per unit.

• $3.00 savings per unit.