A company has two options. Calculate the profitability of the proposals under the return on investment method Proposal I Proposal II Automatic machine Ordinary Machine Cost 220000 60000 Estimated life 5.5 years 8 years Estimated sales p.a 150000 150000 Cost : Material 50000 50000 Labor 12000 60000 Variable overheads 24000 20000 16

A company has two options. Calculate the profitability of the proposals under the return on investment method Proposal I Proposal II Automatic machine Ordinary Machine Cost 220000 60000 Estimated life 5.5 years 8 years Estimated sales p.a 150000 150000 Cost : Material 50000 50000 Labor 12000 60000 Variable overheads 24000 20000 16

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company has two options. Calculate the profitability of the proposals under the return on investment
method
Proposal I
Proposal II
Automatic machine
Ordinary Machine
Cost
220000
60000
Estimated life
5.5 years
8 years
Estimated sales p.a
150000
150000
Cost : Material
50000
50000
Labor
12000
60000
Variable overheads
24000
20000
16
hp

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Step 1: Computation of net operating income

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