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Cost-Benefit Analysis

Cost-Benefit Analysis

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Faced with rising pressure for a $17 per hour minimum wage rate, the farming industry is currently exploring the possible use of robotics to replace some farm workers. The Farmhand is one such robot, its job is to thin out a field of lettuce, removing the least promising buds of lettuce. By removing these weaker plants, the stronger lettuce plants have more room to grow. Assume the following facts: (Click the icon to view the information) Cost-Benefit Analysis Expected Benefits (Cost Savings): Total expected benefits Expected Costs: Total expected costs Net expected benefit (cost) While the Farmhand itself may be in workable condition for up to five years, 40 the farm would view its implementation as a one-year experiment. Requirement Perform a cost-benefit analysis for the first year of implementation to determine whether the Farmhand would be a financially viable investment if the minimum wage is raised to $17 per hour. (Round your answers to the nearest whole dollar) Cost and Benefit Information 1. One Farmhand would do the work of 25 farm workers. 2. Each farm worker typically works 30 hours on the lettuce thinning process each year. 3. Each farm worker would eam $17 per hour plus 7.65% payroll tax 4. The Farmhand is estimated to cost $7,000 plus $900 for delivery. 5. Annual costs of operating the Farmhand are expected to be $2,400. Print Done X
Transcribed Image Text:Faced with rising pressure for a $17 per hour minimum wage rate, the farming industry is currently exploring the possible use of robotics to replace some farm workers. The Farmhand is one such robot, its job is to thin out a field of lettuce, removing the least promising buds of lettuce. By removing these weaker plants, the stronger lettuce plants have more room to grow. Assume the following facts: (Click the icon to view the information) Cost-Benefit Analysis Expected Benefits (Cost Savings): Total expected benefits Expected Costs: Total expected costs Net expected benefit (cost) While the Farmhand itself may be in workable condition for up to five years, 40 the farm would view its implementation as a one-year experiment. Requirement Perform a cost-benefit analysis for the first year of implementation to determine whether the Farmhand would be a financially viable investment if the minimum wage is raised to $17 per hour. (Round your answers to the nearest whole dollar) Cost and Benefit Information 1. One Farmhand would do the work of 25 farm workers. 2. Each farm worker typically works 30 hours on the lettuce thinning process each year. 3. Each farm worker would eam $17 per hour plus 7.65% payroll tax 4. The Farmhand is estimated to cost $7,000 plus $900 for delivery. 5. Annual costs of operating the Farmhand are expected to be $2,400. Print Done X
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