Camptown Togs, Inc., a children’s clothing manufacturer, has always found payroll processing to becostly because it must be done by a clerk. The numberof piece–goods coupons received by each employeeis collected and the types of tasks performed by eachemployee are calculated. Not long ago, an industrialengineer designed a system that partially automatesthe process by means of a scanner that reads thepiece–goods coupons. Management is enthusiasticabout this system, because it utilizes some personalcomputer systems that were purchased recently. It isexpected that this new automated system will save$45,000 per year in labor. The new system will costabout $30,000 to build and test prior to operation. Itis expected that operating costs, including incometaxes, will be about $5,000 per year. The system willhave a five-year useful life. The expected net salvagevalue of the system is estimated to be $3,000.(a) Identify the cash inflows over the life of theproject.(b) Identify the cash outflows over the life of theproject.(c) Determine the net cash flows over the life of theproject.Payback PeriodUnless otherwise mentioned, problems use “paybackperiod” to mean “conventional payback period.”
Camptown Togs, Inc., a children’s clothing manufacturer, has always found payroll processing to be
costly because it must be done by a clerk. The number
of piece–goods coupons received by each employee
is collected and the types of tasks performed by each
employee are calculated. Not long ago, an industrial
engineer designed a system that partially automates
the process by means of a scanner that reads the
piece–goods coupons. Management is enthusiastic
about this system, because it utilizes some personal
computer systems that were purchased recently. It is
expected that this new automated system will save
$45,000 per year in labor. The new system will cost
about $30,000 to build and test prior to operation. It
is expected that operating costs, including income
taxes, will be about $5,000 per year. The system will
have a five-year useful life. The expected net salvage
value of the system is estimated to be $3,000.
(a) Identify the
project.
(b) Identify the
project.
(c) Determine the net
project.
Payback Period
Unless otherwise mentioned, problems use “payback
period” to mean “conventional payback period.”
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