Old Elevator		New Elevator
	Purchase price	$102000		$ 167000
	Estimated salvage value	0		0
	Estimated useful life	4years		5years
	Depreciation method	Straight-line		Straight-line
	Annual operating expenses other than depreciation:
	Variable	$28000		$18000
	Fixed	16000		6000

Annual revenues are $756000 and selling and administrative expenses are $44000, regardless of which elevator is used. If it replaces the old elevator now, at the beginning of 2022, Tamarisk Condos will be able to sell it for $16000.

Determine any gain or loss if the old elevator is replaced.

If the old elevator is replaced Tamarisk Condos will incur a select an option lossprofit of $enter a dollar amount .

Question Part Score

--/2

Prepare a 5-year summarized income statement for each of the following assumptions:

(1) The old elevator is kept.

Sales				$enter a dollar amount
Less costs:
Variable operating costs		$enter a dollar amount
Fixed operating costs		enter a dollar amount
Selling and administrative		enter a dollar amount
Depreciation		enter a dollar amount		enter a subtotal of the four previous amounts
Net income				$enter a total amount

(2) The old elevator is replaced.

Sales			$enter a dollar amount
Less costs:
Variable operating costs	$enter a dollar amount
Fixed operating costs	enter a dollar amount
Selling and administrative	enter a dollar amount
Depreciation	enter a dollar amount		enter a subtotal of the four previous amounts
Operating income			enter a total amount for the first part
Less: Loss on old elevator			enter a dollar amount
Net income			$enter a total amount

Question Part Score

--/10

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, e.g.-15,000 or parenthesis, e.g. (15,000).)

	Retain Old Elevator		Replace Old Elevator		Net Income Increase (Decrease)
Variable operating costs	$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Fixed operating costs	enter a dollar amount		enter a dollar amount		enter a dollar amount
New elevator cost	enter a dollar amount		enter a dollar amount		enter a dollar amount
Salvage on old elevator	enter a dollar amount		enter a dollar amount		enter a dollar amount
Totals	$enter a total amount		$enter a total amount		$enter a total amount

The old elevator select an option shouldshould not be replaced.