Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of four years. It can be sold now for $57,000. Variable manufacturing costs are $44,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years.

	Machine A	Machine B
Purchase price	$ 121,000	$ 135,000
Variable manufacturing costs per year	18,000	14,000

(a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine?

Skull Company makes snowboards and uses the total cost method in setting product price. Its costs for producing 12,500 units follow. The company targets a 10.0% markup on total cost.

Variable Costs per Unit
Direct materials	$ 103
Direct labor	28
Overhead	23
Selling, general and administrative	8

Fixed Costs (total)
Overhead	$ 473,000
Selling, general and administrative	452,000

1. Compute the total cost per unit if 12,500 units are produced. 2. Compute the dollar markup per unit. 3. Compute the selling price per unit.

Compute the income increase or decrease from replacing the old machine with Machine A. indicated with a minus sign.) Compute the income increase or decrease from replacing the old machine with Machine B. indicated with a minus sign.) \begin{tabular}{|l|} \hline 1. Total cost per unit \\ \hline 2. Markup per unit \\ \hline 3. Selling price per unit \end{tabular}