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Granfield Company has a piece of manufacturing equipment with a book value of $41,500 and a remaining useful life of four years. At the end
Granfield Company has a piece of manufacturing equipment with a book value of $41,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $129,000 and receive $23,200 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $42,000 per year. The new equipment will reduce variable manufacturing costs by $20,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is: Multiple Choice $23,800 decrease $82,000 increase $17,700 decrease $56,050 increase $23,800 increase Markson Company had the following results of operations for the past year: A foreign company offers to buy 3,400 units at $14 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $2,720 for the purchase of special tools. Markson's annual productive capacity is 16,200 units. If Markson accepts this additional business, its profits will: Multiple Choice Increase by $5,950. Decrease by $10,550
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