Hello,

I have a cost accounting question. I saw that this question has been answered before but not based on the five year summary.

Murl Plastics Inc. purchased a new machine one year ago at a cost of $87,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below:

Present Machine			Proposed New Machine
Purchase cost new	$	87,000		$	130,500
Estimated useful life new		6	years		5	years
Annual operating costs	$	60,900		$	20,300
Annual straight-line depreciation		14,500			26,100
Remaining book value		72,500
Salvage value now		14,500
Salvage value in five years		0			0

Even though the new machine looks good, said the president, we cant get rid of that old machine if it means taking a huge loss on it. Well have to use the old machine for at least a few more years.

Sales are expected to be $304,500 per year, and selling and administrative expenses are expected to be $182,700 per year, regardless of which machine is used.

Required:

1.	Prepare a summary income statement covering the next five years, assuming the following:

a.	The new machine is not purchased.
b.	The new machine is purchased.
	(Leave no cells blank - be certain to enter "0" wherever required.)

2.	Compute the net advantage of purchasing the new product using relevant costs.

Thank you