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Business, 30.05.2020 05:01 kittenlover5031

Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.

Current Machine New Machine
Original purchase cost $15,300 $25,100
Accumulated depreciation $6,200
Estimated annual operating costs $24,800 $19,800
Remaining useful life 5 years 5 years

If sold now, the current machine would have a salvage value of $10,800. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.
Should the current machine be replaced?

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