Xu Company is considering replacing one of its manufacturing machines. The machi
ID: 2382053 • Letter: X
Question
Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of $43,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $53,000. Variable manufacturing costs are $33,800 per year for this machine. Information on two alternative replacement machines follows.
Calculate the total change in net income if Alternative A is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the "$" sign in your response.)
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.)
Should Xu keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xu purchase?
Alternative A Alternative B Cost $ 125,000 $ 115,000 Variable manufacturing costs per year 22,700 10,500Explanation / Answer
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