Xinhong Purchase Alternative A Alternative B Calculate the total change in net income if Alternative A is adopted. (Cash outflows should be 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 Xinhong Purchase Alternative A Alternative B Calculate the total change in net income if Alternative B is adopted. (Cash outflo 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
Xinhong Purchase Alternative A Alternative B Calculate the total change in net income if Alternative A is adopted. (Cash outflows should be 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 Xinhong Purchase Alternative A Alternative B Calculate the total change in net income if Alternative B is adopted. (Cash outflo 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
Chapter9: Projecting Financial Statements
Section9.5: Percent-of-sales Projected Financial Statements
Problem 2CC
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Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $41,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $51,000. Variable
Alternative A | Alternative B | ||||||
Cost | $ | 118,000 | $ | 118,000 | |||
Variable manufacturing costs per year | 22,200 | 10,700 | |||||
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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