Ch 10 Ex 10-12 Help Save&Exir; Submit Check my work Xinhong Company is consideri
ID: 2589418 • Letter: C
Question
Ch 10 Ex 10-12 Help Save&Exir; Submit Check my work Xinhong Company is considering replacing one of its manufactuning machines. The machine has a book value of $43.000 and a remaining useful lite of 4 years, at which time its salvage value will be zero. It has a current market value of $53,000 Variable manufacturing costs are $34,000 per year for this machine Information on two alternative replacement machines folows points $115,e00 22,400 $212,006 1e, se0 Variable sanufacturing costs per year Calculate the total change in net income it Alternative A, B is adopted Should Xinhong keep or replace ts 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 xinhbng Alternative A Alternative BPurchase mibus sign) Calculate the total change in net income if Altarmative á is adopted. (Cash outlows should be indicated by a SE OR (DECREASE IN Cost to buy new machine Cssh received to trade in old machine Reduction in variable menufacturing costa ype here to searchExplanation / Answer
Answer Part 1 Calculation of total change in net income if alternative A is adopted Particular Amount Cost to buy new machine ($115,000) Cash received to trade in old machine $53,000 Reduction in variable manufacturing cost $46,400 (Refer to working note) Total change in net income ($15,600) Part 2 Calculation of total change in net income if alternative B is adopted Particular Amount Cost to buy new machine ($112,000) Cash received to trade in old machine $53,000 Reduction in variable manufacturing cost $94,000 (Refer to working note) Total change in net income $35,000 Part 3 The company should replace the machine with alternative machine B. this will be increase net income by $35000 Working note: Alternative A : Reduction in variable manufacturing costs ($34000-$22400)*4years = $46400 Alternative B: Reduction in variable manufacturing costs ($34000-$10500)*4years = $94000