A machine can be purchased for $220,000 and used for 5 years, yielding the following net incomes. In projecting net incomes, double-declining balance depreciation is applied, using a 5-year life and a $40,000 salvage value.

	Year 1				Year 2				Year 3				Year 4				Year 5
Net incomes		$	12,000			$	42,000			$	92,000			$	67,000			$	192,000

Compute the machine's payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and final answer to 2 decimal places.)

Payback period

years

A company must decide between scrapping or reworking units that do not pass inspection. The company has 18,000 defective units that cost $5.20 per unit to manufacture. The units can be sold as is for $2.50 each, or they can be reworked for $3.50 each and then sold for the full price of $9.90 each. If the units are sold as is, the company will also be able to build 18,000 replacement units at a cost of $5.20 each, and sell them at the full price of $9.90 each.

(1)	What is the incremental income from selling the units as scrap? (Omit the "$" sign in your response.)

Incremental income

$

(2)	What is the incremental income from reworking and selling the units? (Omit the "$" sign in your response.)

Incremental income

$ these are wrong

Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of $38,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $48,000. Variable manufacturing costs are $33,500 per year for this machine. Information on two alternative replacement machines follows.

	Alternative A			Alternative B
Cost	$	121,000		$	115,000
Variable manufacturing costs per year		22,300			10,900

Calculate the total change in net income if Alternative A is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the "$" sign in your response.)

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	$

Calculate the total change in net income if Alternative B is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the "$" sign in your response.)

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	$

Should Xu keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xu purchase?

	Keep the manufacturing machine
	Alternative B
	Alternative A