21. Dragoo Building Incorporated has a pump with a book value of $240,000 and a four-year remaining life. A new pump is available at a cost of $615,000. Dragoo can receive $48,000 for trading in the old pump. The old pump has variable costs of $310,000 per year. The new pump will reduce variable costs by $145,000 per year over its four-year life. The total impact to Dragoo Building Incorporated over the pumps four-year life is:

Decrease of $615,000.

Decrease of $13,000.

Decrease of $48,000.

Increase of $23,000.

Increase of $13,000.

22. Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $62,000 for the past year as shown below.

Segment Income (Loss)
Sales	$ 1,220,000
Variable costs	909,000
Contribution margin	311,000
Fixed costs	373,000
Income (loss)	$ (62,000)

If the kitchen division is dropped, all $909,000 of its variable costs are avoidable, and $223,800 of its fixed costs are avoidable. The impact on Valdezs income from eliminating this business segment would be:

		$321,600 decrease
		$311,000 increase
		$87,200 increase
		$87,200 decrease
		$311,000 decrease