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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 five years. It can be sold now for $57,000. Variable manufacturing costs are $45,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 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? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Req B Req C and D 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 Costs Purchase of new machine Variable manufacturing costs Income (loss) $ 0 $ 0 $ 0 Reg A Reg B Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should be indicated with a minus sign.) Machine B: Keep or Replace Analysis Keep Replace Income Increase (Decrease) from Replacing Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) $ 0 $ 0 $ 0 Req A Req B Req C and D (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? (c) Should Lopez keep or replace its old machine? (d) Which new machine should Lopez purchase

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