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Rory Company has an old machine with a book value of $77,000 and a remaining...

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Accounting

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.
Prepare a keep or replace analysis of income effects for the machines.
\table[[Keep or Replace Analysis,Keep,Replace,\table[[Income Increase],[(Decrease) if replaced]]],[Revenues,,,],[Sale of existing machine,,,],[Costs,,,],[Purchase of new machine,,,],[Variable manufacturing costs,,,],[Income (loss),,,]]
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