k Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $106,000. Rory can sell its old machine now for $73,000. The old machine has variable manufacturing costs of $32,000 per year. The new machine will reduce variable manufacturing costs by $12,800 per year over its five-year useful life. (a) Prepare a keep or replace analysis of income effects for the machines. (b) Should the old machine be replaced? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a keep or replace analysis of income effects for the machines. ces Keep or Replace Analysis Keep Revenues Sale of existing machine $ 0 Costs Purchase of new machine Variable manufacturing costs Income (loss) Replace Income Increase (Decrease) if replaced
k Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $106,000. Rory can sell its old machine now for $73,000. The old machine has variable manufacturing costs of $32,000 per year. The new machine will reduce variable manufacturing costs by $12,800 per year over its five-year useful life. (a) Prepare a keep or replace analysis of income effects for the machines. (b) Should the old machine be replaced? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a keep or replace analysis of income effects for the machines. ces Keep or Replace Analysis Keep Revenues Sale of existing machine $ 0 Costs Purchase of new machine Variable manufacturing costs Income (loss) Replace Income Increase (Decrease) if replaced
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:k
Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a
new machine at a price of $106,000. Rory can sell its old machine now for $73,000. The old machine has variable manufacturing costs
of $32,000 per year. The new machine will reduce variable manufacturing costs by $12,800 per year over its five-year useful life.
(a) Prepare a keep or replace analysis of income effects for the machines.
(b) Should the old machine be replaced?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Prepare a keep or replace analysis of income effects for the machines.
ces
Keep or Replace Analysis
Keep
Revenues
Sale of existing machine
$
0
Costs
Purchase of new machine
Variable manufacturing costs
Income (loss)
Replace
Income Increase
(Decrease) if replaced
<Required A
Required B >
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