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>
