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 4,000 units at $184 per unit. The equipment has a cost of $446,400, residual value of $33,600, 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 $29.00 113.00 19.20 $161.20 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %
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 4,000 units at $184 per unit. The equipment has a cost of $446,400, residual value of $33,600, 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 $29.00 113.00 19.20 $161.20 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 4,000 units at $184 per unit. The equipment has a cost of $446,400, residual value of $33,600, 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
$29.00
113.00
19.20
$161.20
Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
%
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