Average Rate of Return-New Product Hana 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 $307 per unit. The equipment has a cost of $502,200, residual value of $37,800, 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 $52.00 Direct materials 204.00 Factory overhead (including depreciation) 35.00 Total cost per unit $291.00 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %
Average Rate of Return-New Product Hana 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 $307 per unit. The equipment has a cost of $502,200, residual value of $37,800, 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 $52.00 Direct materials 204.00 Factory overhead (including depreciation) 35.00 Total cost per unit $291.00 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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Capital Investment Analysis: Hana Inc.
Transcribed Image Text:Average Rate of Return–New Product
Hana 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 $307 per unit. The
equipment has a cost of $502,200, residual value of $37,800, 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
$52.00
Direct materials
204.00
Factory overhead (including depreciation)
35.00
Total cost per unit
$291.00
Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
%
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