Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $42,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $52,000. Variable manufacturing costs are $33,700 per year for this machine. Information on two alternative replacement machines follows.

	Alternative A				Alternative B
Cost	$	117,000			$	119,000
Variable manufacturing costs per year		22,200				11,000

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 INCOMECost to buy new machineCash received to trade in old machineReduction in variable manufacturing costsTotal change in net income