max wayco the business manager for essey industries must select a new computer syste 544814

Incremental Analysis

E 1. Max Wayco, the business manager for Essey Industries, must select a new computer system for his assistant. Rental of Model A, which is similar to the model now being used, is $2,200 per year. Model B is a deluxe system that rents for $2,900 per year and will require a new desk for the assistant. The annual desk rental charge is $750. The assistant’s salary of $1,200 per month will not change. If Model B is rented, $280 in annual software training costs will be incurred. Model B has greater capacity and is expected to save $1,550 per year in part-time wages. Upkeep and operating costs will not differ between the two models.

1. Identify the relevant data in this problem.

2. Prepare an incremental analysis to aid the business manager in his decision.