Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $39,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $49,000. Variable manufacturing costs are $33,900 per year for this machine. Information on two alternative replacement machines follows.

Alternative AAlternative BCost$115,000$111,000Variable manufacturing costs per year22,20010,300

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?

1.Calculate the total change in net income if Alternative A is adopted.

2.Calculate the total change in net income if Alternative B is adopted.

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