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 $14,700 $25,500 Accumulated depreciation $6,500 _ Estimated annual operating costs $24,900 $19,800 Remaining useful life 5 years 5 years If sold now, the current machine would have a salvage value of $10,400. 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. Prepare an incremental analysis to determine whether the current machine should be replaced.

Solution and Explanation:

The following is the incremental analysis  :

ParticularsRetain machineReplace machineNet income

                                                                                    Increase / (Decrease)  

Operating costs$124500             $99000                 25500  

                                                                                      ($124500 - $99000)  

New machine costs-                 25500                  (25500)  

Salvage value (Old)                    10400                      10400  

Total                       $124500             $114100              $10400   Working notes:

Operating cost of retain machine is calculated by multiplying the estimated operating costs of old machine with the number of years. ($24900 multiply with 5 years = $124500).

Operating cost of replace machine is calculated by multiplying with the estimated operating costs of new machine with the number of years ($19800 multiply with 5 years = $99000).

CONCLUSION: using the old machine or the current machine costs higher than the purchasing of the new machine. Therefore, it is advised to replace the old machine with a new machine to save the cost.

the first successful, urban blues recording, selling more than 75,000 copies, was made in year 1920.

mamie smith recorded the first commercially successful example of the urban blues,   with the recording of “crazy blues”."crazy blues" was recorded on august 10, 1920, in new york city. within a month of the release of “crazy blues” it had sold 75,000 copies.