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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 downtime
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: Old Machine New Machine Original purchase cost $362,600 $333,200 225,406 Accumulated depreciation Estimated life 5 years 5 years It is estimated that the new machine will produce annual cost savings of $83,300. The old machine can be sold to a scrap dealer for $8,200. 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 eg.-45 or parentheses eg. (45). Do not leave any field blank. Enter for the amounts.) Retain Equipment Replace Equipment Net Incom Increase/(Decr 1 2 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 for the amounts.) Retain Equipment Replace Equipment Net Incom Increase/(Decr $ $ $ Proceeds from sale of old machine Purchase cost Net incremental net income New machine cost Cost savings Accumulated depreciation $ $ The company purchase the new machine. e Textbook and Media
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