Sew It Inc. 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 revenues by $4,900 per year over its useful life of 7 years.

		Current Machine			New Machine
Original purchase cost		$26,700			$27,900
Accumulated depreciation		$21,600			-
Useful life		7 years			7 years

If sold now, the current sewing machine would have a salvage value of $5,700. 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 7years. 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 revenues $ ta New machine cost Proceeds from sale of old machine Net Incremental savings $ ta $ The company replace the sewing machine