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Last year, Waterway Condos installed a mechanized elevator for its tenants. The owner of the company, Paul White, recently returned from an industry equipment exhibition
Last year, Waterway Condos installed a mechanized elevator for its tenants. The owner of the company, Paul White, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator's speed, comfortable ride, and cost efficiency. Upon returning from the exhibition he asked his purchasing agent to collect price and operating cost data on the new elevator. In addition, he asked the company's accountant to provide him with cost data on the company's existing elevator. The information is presented below: Old Elevator New Elevator Purchase price $126,000 $179.000 Estimated salvage value 0 Estimated useful life 6 years 5 years Depreciation method Straight-line Straight-line Annual operating expenses other than depreciation: Activate Variable $34.700 $11,800 co 0 Variable $34,700 $11,800 Fixed 22,400 8.400 Annual revenues are $239,800 and selling and administrative expenses are $29,200, regardless of which elevator is used. If it replaces the old elevator now, at the beginning of 2022. Waterway Condos will be able to sell it for $25,600, Determine any gain or loss if the old elevator is replaced. if the old elevator is replaced Waterway Condos will incur a of $ SICILIO Ed Ule now (1) The old elevator is kept. Sales Less costs: Variable operating costs Fixed operating costs Selling and administrative Depreciation Net income $ Activa (2) The old elevator is replaced. Sales $ Less costs: Variable operating costs Fixed operating costs Selling and administrative Depreciation Operating income Less: Loss on old elevator Net income Using incremental analysis, determine whether the old elevator should be replaced. (If an amount reduces the net income then enter with a negative sign preceding the number, e3-15,000 or parenthesis, es (15,000).) Retain Replace Net Income Old Elevator Old Elevator Increase (Decrease) Variable operating costs $ Fixed operating costs New elevator cost Salvage on old elevator Totals $ Atte The old elevator be replaced
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