HW Help Sa Xinhong Company is considering replacing one of its manufacturing mac
ID: 2393123 • Letter: H
Question
HW Help Sa Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $38,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $48,000. Variable manufacturing costs are $33,900 per year for this machine. Information on two alternative replacement machines follows lternative $121,000 $110,000 10, 900 Cost Variable manufacturing costs per 2290o year 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 xinhongExplanation / Answer
Answer:
1
Alternative -A
Increase or (Decrease ) in Net Income
Cost to buy a new machine
(121000)
Cash received to trade in old machine
48000
Reduction in variable manufacturing cost
=(33900-22900)*4 year
44000
Total Changes in Net income
(29,000)
______________________________
2
Alternative -B
Increase or (Decrease ) in Net Income
Cost to buy a new machine
(110,000)
Cash received to trade in old machine
48000
Reduction in variable manufacturing cost
=(33900-10900)*4 year
92000
Total Changes in Net income
30,000
____________________________
3
xinhong company should choose Option-B
Cost to buy a new machine
(121000)
Cash received to trade in old machine
48000
Reduction in variable manufacturing cost
=(33900-22900)*4 year
44000
Total Changes in Net income
(29,000)
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