CH 23 #7

Check my work 7 Exercise 23-10 Keep or replace LO P5 1.11 points Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $40,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $50,000. Variable manufacturing costs are $33,800 per year for this machine. Information on two alternative replacement machines follows. Alternative A $125,000 22,200 Cost Variable manufacturing costs per year Alternative B $111,000 10,900 eBook Hint 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? Print Complete this question by entering your answers in the tabs below. References Alternative A Alternative B Xinhong Purchase Calculate the total change in net income if Alternative A is adopted. (Cash outflows should be indicated by a minus sign.) ALTERNATIVE A: INCREASE OR (DECREASE) IN NET INCOME Cost to buy new machine Cash received to trade in old machine 50,000 Reduction in variable manufacturing costs Total change in net income $ 50,000 (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 be indicated by a minus sign.) ALTERNATIVE B: INCREASE OR (DECREASE) IN NET INCOME Cost to buy new machine Cash received to trade in old machine 50,000 Reduction in variable manufacturing costs Total change in net income $ 50,000