Question

In: Accounting

Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good...

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.

Current Machine New Machine
Original purchase cost $14,900 $24,600
Accumulated depreciation $6,700 _     
Estimated annual operating costs $24,500 $19,500
Remaining useful life 5 years 5 years


If sold now, the current machine would have a salvage value of $10,300. 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.

Prepare an incremental analysis to determine whether the current machine should be replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Retain
Machine
Replace
Machine
Net Income
Increase
(Decrease)
Operating costs $ $ $
New machine cost
Salvage value (old)
   Total $ $ $
The current machine should be

replacedretained

.
Click if you would like to Show Work for this question:

Open Show Work

Solutions

Expert Solution

Machine should be replaced so that costs can be reduced and profit can be increased  
Statement showing computations
Particulars Retain Machine Replace Machine Net income Inc(Dec)
Operating costs
Retain =24500*5
Replace =19500*5
              122,500.00                        97,500.00                              25,000.00
New Machine Cost                        24,600.00                           (24,600.00)
Salvage Value Old                        (10,300.00) 10,300.00
Total Costs for 5 years               122,500.00                     111,800.00                              10,700.00

if any doubts please mention in comment


Related Solutions

Top Billers processes invoices for business clients. Lately, Top Billers has been getting complaints about errors...
Top Billers processes invoices for business clients. Lately, Top Billers has been getting complaints about errors in the invoices they have processed. The quality manager for Top Billers decides to select one client at random each day and sample all of that client’s invoices to measure the extent of the problem. a)   If the manager decides to construct a u-chart, what values will be used for the center line, lower control limit, and the minimum and maximum values of the...
The International Monetary Fund has been in the news lately and so has the Export-Import Bank...
The International Monetary Fund has been in the news lately and so has the Export-Import Bank of the United States. Define the purpose of both and discuss their impact on global business. Why are they so controversial?
You supervise a team at work, but morale has been low lately. In business class you...
You supervise a team at work, but morale has been low lately. In business class you are learning about various techniques for motivating employees to perform at a higher level. After trying some of these techniques at work, you notice the team is performing better and customers are happier. As a result, upper management decides to put you in charge of an additional location. In this case, what you learned in business class helped you: a. make better investments. b....
Sports Enterprises experiences level sales on its regular product line. Recently the company has been given...
Sports Enterprises experiences level sales on its regular product line. Recently the company has been given an opportunity to expand its product line. The expected sales for 2019 on the expanded product line are as follows: First Quarter $125,000 Second Quarter $287,500 Third Quarter ` $ 62,500 Fourth Quarter $225,000 First Quarter 2014 $150,000 Sports Enterprises carries inventory equal to 25% of the next quarter’s sales, accounts payable of 10% of the next quarter’s sales and accounts receivables of 30%...
Sports Enterprises experiences level sales on its regular product line. Recently the company has been given...
Sports Enterprises experiences level sales on its regular product line. Recently the company has been given an opportunity to expand its product line. The expected sales for 2019 on the expanded product line are as follows: First Quarter $125,000 Second Quarter $287,500 Third Quarter ` $ 62,500 Fourth Quarter $225,000 First Quarter 2014 $150,000 Sports Enterprises carries inventory equal to 25% of the next quarter’s sales, accounts payable of 10% of the next quarter’s sales and accounts receivables of 30%...
Charlene is the owner of Charlene’s Computer Care (3C) and has been in the business of...
Charlene is the owner of Charlene’s Computer Care (3C) and has been in the business of servicing computers and computer systems at affordable prices for just over five years. 3C‘s primary clients are local businesses but include some residential customers. Their advertised approach is to analyze the problem, develop a range of IT options, explain their specific recommendation to the customer, and finally estimate the time and costs associated with the service prior to commencing work. Their approach has proven...
AWP uses information technology extensively to support its business. For example, AWP has been an industry...
AWP uses information technology extensively to support its business. For example, AWP has been an industry leader in using electronic ordering techniques to reduce paperwork and overhead costs. Presently, many of AWP's customers submit electronic orders. These orders are almost instantly received by AWP's sales department and AWP’s finished goods warehouse. If the requested items are in stock, the order is filled and shipped immediately with a copy of a billing invoice. An electronic copy of the billing invoice is...
Mr. X has been seen his business growing and increasing. It is a good business because...
Mr. X has been seen his business growing and increasing. It is a good business because online sales are available to reach all segment customers. The company is categorized as Small Medium Enterprises. Mr. X tried to anticipate these sales increased by buying more inventories. By buying more inventories, the company can fulfill increasing demand and attract new customers. This is data at present time: Total Assets IDR 100 Fixed Assets IDR 40 Total current assets IDR 60 which including...
This question has been posted before (a good while ago so it's not likely anyone will...
This question has been posted before (a good while ago so it's not likely anyone will respond to comments), but the answers are either wrong or don't actually explain how the answers are obtained. (The answers in the back of the book are 24 for 3 and 100 for 5.) Mathematicians at the University of Florida solved a 30-year-old math problem using the theory of partitions. (Explore, Fall 2000.) In math terminology, a partition is a representation of an integer...
Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he...
Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory.   Assuming the following, what is the NPV of the project and is it financially worthwhile? (12 points available; 9                                                    points gets full credit toward final score) a. The current factory can be sold for $200mm; it has a tax value of $100mm. The current factory produces annual after tax cash flow...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT