Question

Approximately one year later, the hospital is approached by Dyno Technology salesperson, Jacob Cullen, who indicated that purchasing the scanner in 2016 from Bella Inc. was a mistake. He points out that Dyno hasa scanner that will save Twilight Hospital $25,000 a year in operating expenses over its 3-year useful life. Jacob notes that the new scanner will cost $110,000 and has the same capabilities as the scanner purchased last year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Jacob agrees to buy the old scanner from Twilight Hospital for $59,500 Your answer is partially correct. Try again. If Twilight Hospital sells its old scanner on January 2, 2017, compute the gain or loss on the sale Loss on sale

Answer 1

Net Benefit/ Cost due to the change in the scanner is as follows:

	Retain Scanner	Replace Scanner	Net Income Increase/(Decrease)
Annual operating cost	$ 106000	$ 81000
Operating cost for 3 years	$ 318000	$ 243000	$ 75000
New scanner cost		$ 110000	($ 110000)
Old scanner salvage		($ 59500)	$ 59500
Total			$ 24,500

Therefore since there is a benefit of $ 24500. The company is advised to go in for replacement and thereby purchase the new scanner

The decrease in the cost is a saving and the salvage value of the old scanner reduces the cost of the new machine . New scanner cost is an incremental cost.