Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $41.000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $51,000. Variable manufacturing costs are $33,400 per year for this machine. Information on two alternative replacement machines follows. Cost Variable manufacturing costs per year Alternative $118,000 22,000 Alternative $114,000 10,800 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? Complete this question by entering your answers in the tabs below. 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 Reduction in variable manufacturing costs Total change in net income Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $41,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $51,000. Variable manufacturing costs are $33,400 per year for this machine. Information on two alternative replacement machines follows. Cost Variable manufacturing costs per year Alternative $118,000 22,000 Alternative $114,000 10,800 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? Complete this question by entering your answers in the tabs below. 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 Reduction in variable manufacturing costs Total change in net income Yinhani Purchase Harold Manufacturing produces denim clothing. This year, it produced 5,230 denim jackets at a manufacturing cost of $42.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold as is to a secondhand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $31100 and sold to a recycler for $12.00 each. 3. Jackets can be reworked and turned into good Jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,230 Jackets into only 2.990 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,500, but the jackets can then be sold for their regular price of $44.00 each. Required: 1. Calculate the incremental income. Alternative 1 Sell to a secondhand shop Alternative 2 Alternative 3 Disassemble and Rework and sell at sell to a recycler regular prices Incremental revenue Incremental costs $ Incremental income 0 $ 0 $
