pink Spruce Imt. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase operating income by $4,450 per year over its useful life of 7 years. .

	Current Machine	New Machine
Original purchase cost	$48.900	$26.700
Accumulated depreciation	$23,900	-
Remaining useful life	7 years.	7 years.

If sold now, the current sewing machine would have a salvage value of $15,500. If it is used for the remainder of its useful life, the current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years.

a). Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (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	Replace	incremental cost savings
Incremental income
New machine cost
Proceeds from sale of old machine
Net incremental savings

b). The company _______ replace the sewing machine.