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E20.14 (LO 5), AN Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an
E20.14 (LO 5), AN 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. Original purchase cost Accumulated depreciation Estimated annual operating costs Current Machine New Machine $15,000 $25,000 $6,000 $25,000 $20,000 5 years 5 years Remaining useful life If sold now, the current machine would have a salvage value of $6,000. 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 5 years. Instructions Prepare an incremental analysis to determine whether the current machine should be replaced. Use incremental analysis concerning elimination of division.
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