Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of
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Question:
Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $44,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $54,000. Variable manufacturing costs are $33,700 per year for this machine. Information on two alternative replacement machines follows.
Particulars | Alternative A | Alternative B |
---|---|---|
Cost | $117,000 | $118,000 |
Variable manufacturing costs per year | $22,700 | $10,700 |
Required
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?
Related Book For
Fundamental accounting principle
ISBN: 978-0078025587
21st edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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