Answered: Cost per unit: Direct labor $ 18.00…

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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Average rate of return-new product

Hana Inc.is considering an invetment in new equipment that will be used to manufacture a smart-phone.The phone is expected to generate additional annual sales of 10,000 units at $300 per unit. The equipment has a cost of $ 4,500,000,residual value of $500,000,and a 10-year life.The equipment can only be used to manufacture the phone.The cost to manufacture the phone follows:

Determine the average rate of return on the equipment.

Cost per unit:
Direct labor
$ 18.00
Direct materials
90.00
Factory overhead (Including depreciation)
Total cost per unit
112.00
$220.00

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