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bulgar [2K]
3 years ago
6

Xinghong company is considering replacing one pf its manufacturing machines. The machine has a book value of $44000 and a remain

ing useful life of five years, at which time its salvage value will be zero. It has a curretn market value of 54000 variable manufacturing costs are $33600 per year for this machine. Inforamation on two alternative replacement machines follows.
Alternative A Alternative B
Cost $117,000 $118,000
Variable manufacturing costs per year 22,700 10,700
1. Calculate the total change in net income if Alternative A is adopted.
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
2. Calculate the total change in net income if Alternative B is adopted.
Alternative B: 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
3. Should Xu keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xu purchase?
A. Alternative B
B. Alternative A
C. Keep the manufacturing machine
Business
1 answer:
Artist 52 [7]3 years ago
5 0

Answer:

1. Decrease in Net Income of -$8,500

2. Increase in Net Income of $50,500

3. Replace the old machine with Alternative B

Explanation:

1.

Alternative A  

Cost to Buy New Machine -$117,000

Cash received to trade in old machine $54,000

Reduction in Variable Manufacturing Costs (($33,600*5 years ) - (22,700*5 years )) $54,500

Total change in Net Income -$8,500

2.

Alternative B  

Cost to Buy New Machine -$118,000

Cash received to trade in old machine $54,000

Reduction in Variable Manufacturing Costs (($33,600*5years ) - (10,700*5 years )) $114,500

Total change in Net Income $50,500

<em>3. Replacing the old machine with alternative B will result in an increased income of $50,500 so it is a good option. </em>

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Division A offers its product to outside markets for $30. It incurs variable costs of $11 per unit and fixed costs of $75,000 pe
olga55 [171]

Answer:

a. See part a below for the analysis.

b. We have:

1. Division A total cost = $1,131,000

2. Division A total profit or benefit = $1,509,000

3. Division B total cost = $1,320,000

4. Division A total profit or benefit = $44,000

Explanation:

Note: See the attached excel file for the calculation of calculation of costs and benefits of options available to Divisions A and B.

a. What are the costs and benefits of the alternatives available to Division A and Division B with respect to the transfer of Division A's product? Assume that Division A can market all that it can produce.

Under this condition, each analysis is based on the condition that either Division A or Division B will pay for the transportation cost.

From part a the attached excel file, we have:

1. Division A will incur a total cost of of $559,000 and gets a profit or benefit of $761,000 if it sells to the outside market.

2. Division A will incur a total cost of of $647,000 and gets a profit or benefit of $673,000 if it sells to Division B.

3. Division B will incur a total cost of $1,408,000 if it buys from Division A.

4. Division B will incur a total cost of $1,364,000 if it buys alternate supplier. It thereby saves the transportation cost of $88,000 of buying from A as a benefit.

b. How would your answer change if Division A had idle capacity sufficient to cover all of Division B's needs?

Under this condition, it is assumed that Division A will pay for the transportation cost. Therefore, Division A will sell to both the outside market and Division B.

From part b of the attached excel file, we will have the following based on this condition:

1. Division A total cost = Total cost of selling to the outside market + Total cost of selling to Division B = $559,000 + $572,000 = $1,131,000

2. Division A profit or benefit cost = Total profit or benefits of selling to the outside market + Total profit or benefits of selling to Division B = $761,000 + $748,000 = $1,509,000

3.  Division B will incur a total cost of $1,320,000 by buying from Division A. It thereby saves $44,000 (i.e. $1,364,000 - $1,320,000 = $44,000) as a benefit for not buying from alternate supplier.

Download xlsx
3 0
2 years ago
Do personal profits earned directly as a result of one partner's connection with the partnership belong to the firm:_________
sergejj [24]

Answer:

No

Explanation: The key word is it was earned as result of the connection to the firm so it is split between the partners

8 0
2 years ago
A company with a high ratio of fixed costs:
garik1379 [7]

Answer:

The correct answer is: more likely to experience a loss when sales are down than a company with mostly variable costs.

Explanation:

The fixed cost ratio is a simple ratio that divides fixed costs by net sales.

The profit formula is:

Profit = Sales- Total cost =(Price * Q)-(FC + VC*Q)

Where  

FC=Fixed cost

VC= variable cos t

Q=produce quantity

If sales go down,  we have to pay this fixed cost even if we have no sales.  So if this Fixed cost are high ,  is most likely we are going to experience loss

4 0
3 years ago
On December 31, the balance in the office supplies account is $1,300. A physical count shows $510 worth of supplies on hand. Req
madam [21]

Answer:

Date                    Account title                                               Debit          Credit

December 1        Office Supplies Expense                           $790

                            Office Supplies                                                             $790

Explanation:

Office supplies is an asset but when it is used it should be debited to the office supplies expense account because it becomes an expense that should be catered for in the Income statement.

The office expense that is used for the year is:

= Book balance - Physical inventory

= 1,300 - 510

= $790

3 0
2 years ago
EBay's customers enrich the Web site by giving their reviews after every purchase. These reviews are used by buyers to evaluate
Tatiana [17]

The options are:

A) reverse engineeringB) value chain extensionC) focused strategyD) niche market

Answer:

Value chain extension.

Explanation:

Value chain extension are the steps a company takes to extend the reach of their products to customers, and multiple relationships are built that impacts the bottom line.

In this instance eBay customers write a review after each purchase and the reviews are now used by buyers to evaluate the seller's.

EBay in turn gives special privileges. This is eBay creating an extended value chain in delivering it's products to customers.

4 0
3 years ago
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