Splish 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 operating income by $4,550 per year over its useful life of 8 years. Original purchase cost Accumulated depreciation Remaining useful life Incremental income New machine cost Current Machine If sold now, the current sewing machine would have a salvage value of $15,000. 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 8 years. Proceeds from sale of old machine Net incremental savings $45,700 $21,100 8 years 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).) The company New Machine $ $25,000 8 years Retain replace the sewing machine. Replace Incremental cost savings

Splish 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 wilt be faster and eliminate overtime, it will increase operating income by $4,550 per year over its useful life of 8 years. If sold now, the current sewing machine would have a salvage value of $15,000. 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 8 years. 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, es. 15,000 or parenthesis, es. (15,000)