Ivanhoe 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 $25.300 Original purchase cost $14,600 Accumulated depreciation $6.100 $24,700 Estimated annual operating costs $19,800 5 years Remaining useful life 5 years If sold now, the current machine would have a salvage value of $11,500. 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 eg.-45 or parentheses eg. (45).) Retain Machine Replace Machine Net Income Increase (Decrease) Operating costs New machine cost Salvage value (old) Total The current machine should be Ivanhoe Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income Tingler $296,000 151.100 144.900 116,616 $28.284 Shocker Stunner $504,000 $200,000 203.300 138,600 300,700 61,400 228,184 93,900 $72,516 $(32,500) Fixed expenses consist of $296,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler). $79,000 (Shocker), and $34,700 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. (a) Compute current net income for Ivanhoe Company. Net income $ Compute net income by product line and in total for Ivanhoe Company if the company discontinues the Stunner product line. (Hint: Allocate the $296,000 common costs to the two remaining product lines based on their relative sales. Tingler Net Income $ Shocker Net Income $ Total Net Income Should Ivanhoe eliminate the Stunner product line? Why or why not? Net income would from $