Urrent Attempt in Progress

Sunland Compamy is considering the purchase of a new machinc. The inwolce peion of the machine is $$120000,$ freight charges are estimated to be $$3,000,$ and installation costs are copected to be $$5,000.$ The salvage value of the new equipment is oupected to be cerv after a useful life ol $5$ years. The comparry could retain the existing equipment and use it for an additional $5$ years if it doesn't purchase the new machine. At that time, the equipment's salvage value would be zera. II Sunland purchases the new machine now, it would have to scrap the existing machine. Sunland's accountant, Maria Miler, has accumulated the foliowing data for annual sales and experses, with and without the new machine:

Wahout the new machine, Sunland can sell $10,000$ units of product anfually at a per$-$unit selling price of $$100,$ If it purchases the new mactine, the number of units produced and sold would increase by $10\%,$ and the selling price would remain thesame.

The new machine is faster than the old machine, and it is more efficient in its use of materlals With the old mochine, the groes profit rase is $25\%$ of sales, whereas the rate will be $30\%$ of sales with the new machine.

Annual seling expenses are $$155,000$ with the current mbchine. Because the new machire would produce a greater number of units to be sold, annual sellirs expenses are expected to increase by $10$ if it is purchased.

Acrual administrotive expenses are expected to be $$$6,000$ with the old machin, and $$97,000$ with the new muchine.

The carrent book velue of the existing machine is $$31000.$ Sunland uses straight line depredistion.

Prepare an incremental analysis for the five years that shows whether Sunl and should retain the existing machine of buy the new one.

Keep Old Machine

Sales

$

Less costs:

Cost of goods sold

$

Selling

Administrative

Operating income

$

Buy New Machine

Sales

$

Less costs:

Cost of goods sold $

Selling

Administrative

Operating income

$

$\backslash$table$[[,\backslash$table$[[$Retain Old$],[$Machine$]],\backslash$table$[[$Replace Old$],[$Machine$]],\backslash$table$[[$Net Income$],[$Increase $($Decrease$)]],],[$Operating income,$$,,,],[$Cost of the new machine,,,,$],[$Totals$,$$$,$$$,$$$,]]$

The new machine be purchased.