Xinhong company is considering replacing one of its manufacturing machines. the machine has a book value of $43,000 and a remaining useful life of 4 years, at which time its salvage value will be zero. it has a current market value of $53,000. variable manufacturing costs are $33,500 per year for this machine. information on two alternative replacement machines follows.
alternative a alternative bcost $115,000 $125,000vmc per year 19,000 15,000should xinhong keep or replace its manufacturing machine? if the machine should be replaced, which alternative new machine should xinhong purchase?
Solved
Show answers
More tips
- F Family and Home Tender Care for Your Parquet: Is it Possible to Clean Parquet?...
- S Society and Politics Is It Fact or Fiction? Let s Talk About Anton Chekhov s Pseudonym...
- S Sport Playing Bowling: Rules and Advice for Novices...
- C Computers and Internet How to Properly Repartition a Hard Drive?...
- A Auto and Moto What Is the Cost of Customs Clearance for a Car in Russia?...
- L Leisure and Entertainment Should You Buy a Ceramic Knife?...
- C Computers and Internet How to easily and quickly disable Firebug in Gmail and Google Docs...
- G Goods and services How to sew a ribbon: Tips for beginners...
- F Food and Cooking How to Make Mayonnaise at Home? Secrets of Homemade Mayonnaise...
- C Computers and Internet Which Phone is Best for Internet Surfing?...
Answers on questions: Business
- B Business What types of investments do banks use to make a profit? Check all that apply.-opening checking accounts-starting new businesses-buying stocks and bonds-buying several...
- B Business To ensure a safe environment its important to...
- B Business Entrepreneurship: Creating the Business - Course Assessment Module Progress: 0% Which of the following are tools and strategies that are widely used by organizations...
- B Business Google, Bain and Company, and Nestlé Purina PetCare ranked one, two, and three, respectively, on Glassdoor’s 2015 Employees’ Choice Awards list as the best large companies...
- B Business When the expected value of the point estimator is equal to the population parameter it estimates, it is said to be?...
- B Business What percentage of gross income is withheld as an employee s contribution to medicare?...
- C Chemistry Why and how does atom change during time...
- S Spanish Una oración original con las palabras monarquia absoluta,despota,sucumbir,empeorar,naufragar,un levantamiento,intransigente,totalitario...
- M Mathematics Please don t steal, actually try your best and do it fast if you can....
- S SAT F R 3 3 POINTS ! COME GET EM ;)...
Ответ:
Yes, Xinhong replace its manufacturing machine i.e Alternative A because it have negative effect on the net income. So, Alternative B should be purchased and Alternative A should be replaced.
Explanation:
For calculating which machine should be replaced, first we have to compute the net effect of both machines individually.
Alternative A:
The net effect should be calculated by applying an equation which is shown below:
= current market value + difference of variable manufacturing cost - Cost of machine
where,
cost of machine is $115,000
Current market value is $53,000
And, difference of variable cost is
= (variable manufacturing costs - Alternative A variable cost) × number of years
= ($33,500 - $19,000) × 4
= $58,000
Now, apply these values to the above equation
So, the net effect is equals to
= ( $53,000 + $58,000 - $115,000 )
= -$4,000
Alternative B:
The net effect should be calculated by applying an equation which is shown below:
= current market value + difference of variable manufacturing cost - Cost of machine
where,
cost of machine is $125,000
Current market value is $53,000
And, difference of variable cost is
= (variable manufacturing costs - Alternative A variable cost) × number of years
= ($33,500 - $15,000) × 4
= $74,000
Now, apply these values to the above equation
So, the net effect is equals to
= ( $53,000 + $74,000 - $125,000 )
= $2,000
After calculations, we get to know that Alternative B has positive amount which reflect the better profits and better returns in the future.
Yes, Xinhong replace its manufacturing machine i.e Alternative A because it have negative effect on the net income. So, Alternative B should be purchased and Alternative A should be replaced.
Ответ:
$500 billion
Explanation: