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Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of 4...

Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of 4 years, at which time its salvage value will be zero. It has a current market value of $55,000. Variable manufacturing costs are $34,000 per year for this machine. Information on two alternative replacement machines follows.

Alternative A Alternative B
Cost $ 115,000 $ 125,000
Variable manufacturing costs per year 22,000 12,000

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 $

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Accounting - 8217345.xls

SOLUTION:
Computation of Change in Net Income
Particulars Amount Cost to buy new machine
Cash received to trade in old machine
Reduction in variable manufacturing costs $115,000.00
$55,000.00...

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