Johnson Enterprises uses a computer to handle its sales invoices. Lately, busine

Question

Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.

If sold now, the current machine would have a salvage value of $10,100. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.

Should the current machine be replaced? (Enter negative amounts using either a negative sign preceding the

Current Machine New Machine Original purchase cost $14,900 $25,100 Accumulated depreciation $5,700 _      Estimated annual operating costs $24,700 $19,500 Remaining useful life 5 years 5 years

Explanation / Answer

The machine can be replaced

Estimated annual operating cost $ 24,700 $     19,500 $       5,200 Life 5 5 5 Total estimated operating cost for 5 years $123,500 $     97,500 $     26,000 Cost of new machine $     25,100 Increase in Net Income $          900

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.