Last year (2016), Novak Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator's speed, comfort of ride, and cost efficiency. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data on the new elevator. In addition, he asked the company's accountant to provide him with cost data on the company's elevator. This information is presented below.

Old Elevator New Elevator Purchase price$104,000 $160,000 Estimated salvage value 00 Estimated useful life 5 years 4 years Depreciation method Straight-line Straight-line Annual operating costsother than depreciation:Variable$34,400 $11,000Fixed 22,800 8,800

Annual revenues are $240,000, and selling and administrative expenses are $28,000, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2017, Novak Condos will be able to sell it for $24,300.

a 4-year summarized income statement for each of the following assumptions:

(1) The old elevator is retained.

Retain Old ElevatorRevenues$

Less costs:Variable costs$

Fixed costs

Selling & administrative

Depreciation

Net income$

(2) The old elevator is replaced.

Replace Old ElevatorRevenues$

Less costs:Variable costs$

Fixed costs

Selling & administrative

Depreciation

Operating income

Less: Loss on old elevator

Net income$

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Using incremental analysis, determine if the old elevator should be replaced.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Retain

Old ElevatorReplace

Old ElevatorNet Income

Increase

(Decrease)Variable operating costs$

$

$

Fixed operating costs

New elevator cost

Salvage on old elevator

Totals$

$

$