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Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of \$38,000
and a remaining useful life of 4 years, at which time its salvage value will be zero. It has a current market value of
\$48,000. Variable manufacturing costs are \$33,200 per year for this machine. Information on two alternative
replacement machines follows.
Alternative
A
Alternative B
Cost
\$
116,000
\$
113,000
Variable
manufactu
ring costs
per year
22,700
11,000
Calculate the total change in net income if Alternative A is adopted.
(Input all amounts as positive values, except
cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit
Alternative A: Increase or (Decrease) in Net Income
\$
Reduction in variable manufacturing
costs
Total change in net income
\$
Calculate the total change in net income if Alternative B is adopted.
(Input all amounts as positive values, except
cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit
Alternative B: Increase or (Decrease) in Net Income
\$
Reduction in variable manufacturing costs
Total change in net income
\$
Santana Rey has found that her line of computer desks and chairs has become very popular and she is finding it
hard to keep up with demand. She knows that she cannot fill all of her orders for both items, so she decides she
must determine the optimal sales mix given the resources she has available. Information about the desks and chairs
follows.
Desks
Chairs
Selling price
\$
1,153.00
\$
363.75

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per unit
Variable
costs per
unit
600.00
210.00
Contributio
n margin
per unit
\$
553.00
\$
153.75
Direct labor
hours per
unit
4 hours
3hours
Expected
demand for
next quarter
171 desks
46chairs
Santana has determined that she only has 777 direct labor hours available for the next quarter and wants to optimize
her contribution margin given the limited number of direct labor hours available.
Required:
Determine the optimal sales mix and the contribution margin the business will earn at that sales mix.
(Input all
amounts as positive values. Do not round intermediate calculations and round your final answers to 2