Question - 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 5 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.
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Alternative A
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Alternative B
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Cost
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$115,000
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$116,000
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Variable manufacturing costs per year
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22,600
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10,700
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Calculate the total change in net income if Alternative A is adopted.
Calculate the total change in net income if Alternative B is adopted.