Question - 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.