Murl Plastics Inc. purchased a new machine one year ago at a cost of $39,...
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Murl Plastics Inc. purchased a new machine one year ago at a cost of $39, 000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below: In trying to decide whether to purchase the new machine, the president has prepared the following analysis: "Even though the new machine looks good, " said the president, "we can't get rid of that old machine if it means taking a huge loss on it. We'll have to use the old machine for at least a few more years." Sales are expected to be $136, 500 per year, and selling and administrative expenses are expected to be $81, 900 per year, regardless of which machine is used. Required: Prepare a summary income statement covering the next five years, assuming the following: a. The new machine is not purchased. b. The new machine is purchased. (Leave no cells blank - be certain to enter "0" wherever required.) Compute the net advantage of purchasing the new product using relevant costs
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