#4: Keep or Replace Equipment (6 points) Jenkins Inc. is considering disposing of a machine with a book value of $25,000 and an estimated remaining life of ten years. The old machine can be sold for $7,500. A new machine with a purchase price of $75,000 is being considered as a replacement. It will have a useful life of ten years and no residual value. It is estimated that variable manufacturing costs will be reduced from $35,000 to $22,500 if the new machine is purchased. Should Jenkins Inc. replace the machine? What is the incremental net income or net loss if Patton United chooses to keep the machine? #5: Make or Buy (6 points) Cypress Co. is trying to decide whether to manufacture a component or continue to purchase this component from an outside supplier at $36 per unit. Management estimates the need for this component at 150,000 units. If they make the component, their fixed costs would increase by $100,000 and manufacturing unit costs would be: Direct Materials Direct Labor Variable MOH $16.00 $14.00 $4.00 Should Cypress Co. make or buy the component? What is the incremental net income or net loss if Cypress Co. chooses to buy the component from the outside supplier