Business College

Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $55,000. Variable manufacturing costs are $33,400 per year for this machine. Information on two alternative replacement machines follows.
Alternative A Alternative B
Cost $ 119,000 $ 112,000
Variable manufacturing costs per year 23,000 10,200
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?

Answers

Answer 1

Answer and Explanation:

The computation is shown below;

For Alternative A

Cost to buy new machine -$119,000.00

Cash received $55,000.00

Reduction in variable manufacturing cost ($33400 - $23000) ×5 $52,000.00

Total change in net income -$12,000.00

For Alternative B  

Cost to buy new machine -$112,000.00

Cash received $55,000.00

Reduction in variable manufacturing cost ($33400 - $10200) × 5 $116,000.00

Total change in net income $59,000.00

So here Xinhong should purchase a machine that belong from Alternative B.

Related Questions

what is the primary benefit people receive in exchange for paying premiums to an insurance company

Answers

Answer:

The insurance company will pay for covered expenses

With premium rates from insurance companies, the overall protection is much more guaranteed than a regular, and perhaps the insurance will cover more than regular insurance.

A benefit that people receive in exchange for paying premiums is that insurance company B.will pay for covered expenses.

What is insurance?

The insurance can be regarded as a process of insuring one's property or life in case of danger or any future problems.

The insurance company pays you or someone you choose if something bad happens to you. If you have no insurance and an accident happens, you may be responsible for all related costs.

Therefore, option B is correct because, when people pay their premiums, the company will be available to covered expenses.

Learn more about insurance here,

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