Zoom Zoom Scooter company is planning to add a new product to its line. There are two choices.

To manufacture product SB1, the company needs to buy a new machine at a $519,000 cost with an expected four-year life and a $15,000 salvage value. All sales are for cash, and all cost are out-of-pocket, except for depreciation on the new machine. Additional information includes:

Expected annual sales of new product $1,960,000 Expected annual costs of new product Direct materials 460,000 Direct labor 678,000 Overhead (excluding straight-line depreciation on new machine) 338,000 Selling and administrative expenses 173,000 Income taxes 30% Expected annual sales of new product $1,850,000 Expected annual costs of new product Direct materials 470,000 Direct labor 671,000 Overhead (excluding straight-line depreciation on new machine) 336,000 Selling and administrative expenses 161,000 Income taxes 34%