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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
Transcribed Image Text: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
Transcribed Image Text: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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