Question

Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of $38,000 and a remaining useful life of 4 years, at which time its salvage value will be zero. It has a current market value of $48,000. Variable manufacturing costs are $33,200 per year for this machine. Information on two alternative replacement machines follows.


Calculate the total change in net income if Alternative A is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the "$" sign in your response.)
Alternative A: Increase or (Decrease) in Net Income
Cost to buy new machine

Cash received to trade in old machine
Reduction in variable manufacturing costs
Total change in net income
Calculate the total change in net income if Alternative B is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the "$" sign in your response.)
Alternative B: Increase or (Decrease) in Net Income
Cost to buy new machine

Cash received to trade in old machine
Reduction in variable manufacturing costs
Total change in netincome


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  • CreatedSeptember 19, 2013
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