Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of four years, at which time its salvage value will be zero. It has a current market value of $55,000. Variable manufacturing costs are $33,100 per year for this machine. Information on two alternative replacement machines follows. Alternative A Alternative BCost$124,000 $119,000 Variable manufacturing costs per year 22,000 10,800 Calculate the total change in net income if Alternative A, B is adopted. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase? XinhongAlternative A Alternative BPurchaseCalculate the total change in net income if Alternative A is adopted. (Cash outflows should EALTERNATIVE A: INCREASE OR (DECREASE) IN NET INCOMECost to buy new machineCash received to trade in old machineReduction in variable manufacturing costsTotal change in net incomeAlternative AAlternative B Alternative A Alternative BXinhongPurchaseCalculate the total change in net income if Alternative B is adopted. (Cash outflows shouldALTERNATIVE B: INCREASE OR (DECREASE) IN NET INCOMECost to buy new machineCash received to trade in old machineReduction in variable manufacturing costsTotal change in net incomeAlternative AXinhong Purchase

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Answered: Xinhong Alternative A Alternative B…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of four years, at which time its salvage value will be zero. It has a current market value of $55,000. Variable manufacturing costs are $33,100 per year for this machine. Information on two alternative replacement machines follows.

	Alternative A		Alternative B
Cost	$	124,000		$	119,000
Variable manufacturing costs per year		22,000			10,800

Calculate the total change in net income if Alternative A, B is adopted. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?

Xinhong
Alternative A Alternative B
Purchase
Calculate the total change in net income if Alternative A is adopted. (Cash outflows should E
ALTERNATIVE A: INCREASE OR (DECREASE) IN NET INCOME
Cost to buy new machine
Cash received to trade in old machine
Reduction in variable manufacturing costs
Total change in net income
Alternative A
Alternative B

Alternative A Alternative B
Xinhong
Purchase
Calculate the total change in net income if Alternative B is adopted. (Cash outflows should
ALTERNATIVE B: INCREASE OR (DECREASE) IN NET INCOME
Cost to buy new machine
Cash received to trade in old machine
Reduction in variable manufacturing costs
Total change in net income
Alternative A
Xinhong Purchase

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