ABC Corporation is considering starting to manufacture a new product where an equipment costing P200,000 must be installed, which will have a life of 8 years and a salvage value equal to 25% of its cost at the end of that time. Production cost are as follows: Direct labor = 12,000+12 per unit. The new product is estimated to be sold at P25 per unit. If the company’s capital is worth 12.5% before income taxes. a. How many units must be produced to break even? b. If P5000 units are sold out, determine the rate of return.
ABC Corporation is considering starting to manufacture a new product where an equipment costing P200,000 must be installed, which will have a life of 8 years and a salvage value equal to 25% of its cost at the end of that time. Production cost are as follows: Direct labor = 12,000+12 per unit. The new product is estimated to be sold at P25 per unit. If the company’s capital is worth 12.5% before income taxes. a. How many units must be produced to break even? b. If P5000 units are sold out, determine the rate of return.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Corporation is considering starting to manufacture a new product where an
equipment costing P200,000 must be installed, which will have a life of 8 years
and a salvage value equal to 25% of its cost at the end of that time. Production
cost are as follows: Direct labor = 12,000+12 per unit. The new product is
estimated to be sold at P25 per unit. If the company’s capital is worth 12.5%
before income taxes.
a. How many units must be produced to break even?
b. If P5000 units are sold out, determine the
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