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 5 years, at which time its salvage value will be zero. It has a current market value of $55,000. Variable manufacturing costs are $33,400 per year for this machine. Information on two alternative replacement machines follows.

	Alternative A				Alternative B
Cost	$	119,000			$	112,000
Variable manufacturing costs per year		23,000				10,200

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: 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 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 Which option should Xinhong choose