ate of return-new product Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales units at $186 per unit. The equipment has a cost of $552,400, residual value of $41,600, and an 8-year life. The equipment can only be used to manufacture the pho cost to manufacture the phone follows: Cost per unit: Direct labor Direct materials Factory overhead (including depreciation) Total cost per unit $30.00 117.00 19.75 $166.75 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %
ate of return-new product Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales units at $186 per unit. The equipment has a cost of $552,400, residual value of $41,600, and an 8-year life. The equipment can only be used to manufacture the pho cost to manufacture the phone follows: Cost per unit: Direct labor Direct materials Factory overhead (including depreciation) Total cost per unit $30.00 117.00 19.75 $166.75 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Average rate of return-new product
Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 5,400
units at $186 per unit. The equipment has a cost of $552,400, residual value of $41,600, and an 8-year life. The equipment can only be used to manufacture the phone. The
cost to manufacture the phone follows:
Cost per unit:
Direct labor
Direct materials
Factory overhead (including depreciation)
Total cost per unit
Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
Feedback
$30.00
117,00
19.75
$166.75
Check My Work
Divide the estimated average annual income by the average investment. Sales price x units sold, less unit cost x units sold, equals average annual income.
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