Barrila Enterprises uses a word processing computer to handle its sales invoices.

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

If sold now, the current machine would have a salvage value of $5,000. 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 five years.

 Instructions 

Should the current machine be replaced? (Ignore the time value of money.

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Original purchase cost Accumulated depreciation Estimated operating costs Useful life Current Machine $15,000 $ 6,000 $20,000 5 years New Machine $25,000 $15,000 5 years