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Sandhill Timber Corporation uses a machine that removes the bark from cut timber. The machine is unreliable and results in a significant amount of
Sandhill Timber Corporation uses a machine that removes the bark from cut timber. The machine is unreliable and results in a significant amount of downtime and excessive labor costs. Management is considering replacing the machine with a more efficient one which will minimize downtime and excessive labor costs. Data are presented below for the two machines: Original purchase cost Accumulated depreciation Estimated life Old Machine New Machine $408,000 $444,000 276,000 5 years 5 years It is estimated that the new machine will produce annual cost savings of $102,000. The old machine can be sold to a scrap dealer for $10,400. Both machines will have a salvage value of zero if operated for the remainder of their useful lives. Determine whether the company should purchase the new machine. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any field blank. Enter O for the amounts.)
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