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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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
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?
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