Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $36,000 and a remaining useful life of four years, at which time its salvage value will be zero. It has a current market value of $46,000. Variable manufacturing costs are $33,900 per year for this machine. Information on two alternative replacement machines follows. Cost Variable manufacturing costs per year 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? Alternative A Alternative B Complete this question by entering your answers in the tabs below. Xinhong Purchase Alternative A $117,000 22,000 Reduction in variable manufacturing costs Total change in net income Alternative B $119,000 10,400 Calculate the total change in net income if Alternative B is adopted. (Cash outflows should be indicated by a minus sign.) ALTERNATIVE B: INCREASE OR (DECREASE) IN NET INCOME Cost to buy new machine $ (119,000) Cash received to trade in old machine 46,000 $ (73,000)

Q: How does the variable cost per unit change as the level of activity (or cost driver) increases? Why?

A: A variable cost changes is directly proportional to the change in the level of activity or cost…

Q: Q.How do managers plan for variable overhead costs?

A: The cost which is dependent upon the level of output and changes if the level of output fluctuates…

Q: What is the effect of an increase in activity on the followingitems?a. Total variable costs.b.…

A: Cost behavior: Cost behavior is the relationship between cost and activity and it is relevant to the…

Q: How does the planning of fixed overhead costs differ from the planning of variable overhead costs?

A: Variable cost: The cost which fluctuates on the basis of the output level produced. The variable…

Q: explain fixed and variable costs within a relevant range of production

A: The objective of this question is to understand the concepts of fixed and variable costs within a…

Q: Why would someone use variable costing over absorption Costing ?

A: The variable costing method is the method that only includes the variable costing whereas,…

Q: Why is absorption costing the method allowable for GAAP yet managers prefer variable costing

A: In variable costing only variable costs are included in the product cost. Fixed costs re considered…

Q: costs that change proportionately according to the changes in the cost driver.......

A: variable costs are the costs that change according to the changes in the cost drivers or changes…

Q: Explain the effect of a decrease in the level of activity (cost driver) on: (i) total fixed cost…

A: Lets understand the basics. Fixed cost are cost which do not change with level of output. In other…

Q: What effect does an increase in volume have on—c. Total fixed costs?

A:

Q: Explain variable overhead costs.

A: Variable Costing: “Variable costing is a method that allocates only variable manufacturing costs to…

Q: Variable costs per unit are affected by an increase or decrease in activity. True or False True…

A: Variable Cost is that type of cost which is associated with the number of units produced or volume…

Q: Question: In a manufacturing setting, direct labor costs are considered: a) Variable costs b) Fixed…

A: Variable costs - Fixed costs - Mixed costs- Overhead costs

Q: When output volume increases, do fixed costs per unit increase, decrease, or stay the same within…

A: Fixed Costs:   These are the costs that remain constant in total dollar amount irrespective to the…

Q: What are the expected cost takedown rates?

A: When a company offers new issues in the market, such as stocks or bonds, they appoint an…

Q: Why is fixed costs changing?

A: In the given problem some estimates related to selling price and cost to be incurred are given and…

Q: How can variable costing be used in service companies?

A: Variable Costing: The variable costing is the method of costing in which only the variable…

Q: Which of the following statements is CORRECT with respect to fixed costs per unit? Select one:…

A: Fixed cost in total remains constant.  They will not change by change in production.

Q: Describe how total variable costs and unit variable costs behave as the level of activity increases?

A: Variable cost varies with the changing level of activity i.e. if the activity increases the variable…

Q: Which costing system would be more efficient when direct materials and direct labor costs are high,…

A: There are mainly two types costing method Traditional costing Activity based costing

Q: iable costs change in direct proportion to a change in the activity level. True or False?

A: There are two types of one is fixed cost and other is variable cost and both are part of the total…

Q: How does the length of the time horizon affect the classification of a cost as fixed or variable?…

A: Cost are being classified as variable and fixed normally. It is necessary to bifurcate the cost in…

Q: what are the possible causes of favourable Labour efficiency variance

A: The capacity to employ labor in a manner that is consistent with expectations is what the labor…

Q: How are absorption costing and variable costing the same? How are they different?

A: Absorption Costing: "Absorption costing is a method that allocates "direct labor, direct materials,…

Q: Describe how total fixed costs and unit fixed costs behave as the level of activity increases

A: Fixed costs are those costs that remain fixed irrespective of the level of activity.

Q: Which of the following describes the behavior of total variable and total fixed costs when level of…

A: Different costs associated with production process are - Fixed cost and variable cost. For example:…

Q: When the level of activity decreases, variable cost will increase or decrease ?

A: Variable costs will decrease when the level of activity decreases. This is because many variable…

Q: What happens to the total variable costs and the total fixed costs when the level of activity…

A: Formula: Total cost = Variable cost + Fixed cost Sum of both variable and fixed cost derives the…

Q: Why functional (or volume)- based costing approaches may produce distorted costs.

A: In a functional-based cost accounting system, costs are allocated to cost objects using unit-based…

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.