EX 25-3 Average rate of return-new product Obj. 2 Galactic Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to SHOW ME HOW generate additional annual sales of 6,000 units at $250 per unit. The equipment has a cost of $850,000, residual value of $50,000, and an eight- year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor $ 15.00 Direct materials 134.00 Factory overhead (including depreciation) Total cost per unit 33.50 $182.50 Determine the average rate of return on the equipment. Answer

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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EX 25-3
Average rate of return-new product
Obj. 2 Galactic Inc. is considering an investment in new equipment that
will be used to manufacture a smartphone. The phone is expected to
SHOW ME HOW
generate additional annual sales of 6,000 units at $250 per unit. The
equipment has a cost of $850,000, residual value of $50,000, and an eight-
year life. The equipment can only be used to manufacture the phone. The cost to
manufacture the phone follows:
Cost per unit:
Direct labor
$ 15.00
Direct materials
134.00
Factory overhead (including depreciation)
Total cost per unit
33.50
$182.50
Determine the average rate of return on the equipment.
Answer
Transcribed Image Text:EX 25-3 Average rate of return-new product Obj. 2 Galactic Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to SHOW ME HOW generate additional annual sales of 6,000 units at $250 per unit. The equipment has a cost of $850,000, residual value of $50,000, and an eight- year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor $ 15.00 Direct materials 134.00 Factory overhead (including depreciation) Total cost per unit 33.50 $182.50 Determine the average rate of return on the equipment. Answer
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