Answer:
Alternative A should be accepted as it is giving favourable result of $30,600
Explanation:
Xinhong Company
ALTERNATIVE A: INCREASE OR (DECREASE) IN NET INCOME
Cost to buy new machine $123,000
Cash received to trade in old machine $48,000
Reduction in variable manufacturing costs = 4*($33500 - $22400) = $44,400
Total change in net income $30,600
ALTERNATIVE B: INCREASE OR (DECREASE) IN NET INCOME
Cost to buy new machine $119,000
Cash received to trade in old machine $48,000
Reduction in variable manufacturing costs = 4*($33500 - $10300) = $92,800
Total change in net income $21,800
Therefore, Alternative A should be accepted as it is giving favourable result of $30,600
