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 $$48,000$ 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 $ $124,000$ $ $139,000$

Variable manufacturing costs per year $22,00013,000$

$($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?

$($d$)$ If the machine should be replaced, which new machine should Lopez purchase?Compute the income increase or decrease from replacing the old machine with Machine A$.($Amounts to be deducted should be indicated with a minus sign.$)$

Machine A: Keep or Replace Analysis

Keep Replace Income Increase $($Decrease$)$ from Replacing

Revenues

Sale of existing machine $$0$ $$57,000$

Costs

Purchase of new machine $$0(124,000)$

Variable manufacturing costs

Income $($loss$)$ $$0$ $$(67,000)$ $$(67,000)$