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 five years, at which time its salvage value will be zero. It has a current market value of $46,000. Variable manufacturing costs are $33,800 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				10,700

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?

ALTERNATIVE B: INCREASE OR (DECREASE) IN NET INCOMECost to buy new machineCash received to trade in old machineReduction in variable manufacturing costsTotal change in net income

Which option should Xinhong choose?