Micro Tek 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 4,100 units at $308 per unit. The equipment has a cost of $343,200, residual value of $25,800, 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 $52.00 Direct materials 204.00 Factory overhead (including depreciation) 34.90 Total cost per unit $290.90 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %

Micro Tek 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 4,100 units at $308 per unit. The equipment has a cost of $343,200, residual value of $25,800, 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 $52.00 Direct materials 204.00 Factory overhead (including depreciation) 34.90 Total cost per unit $290.90 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3E: Average rate of returnnew product Hana Inc. is considering an investment in new equipment that will...

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Average Rate of Return-New Product
Micro Tek 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 4,100 units at $308 per unit. The equipment has a cost of $343,200, residual value of $25,800, 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
$52.00
Direct materials
204.00
Factory overhead (including depreciation)
34.90
Total cost per unit
$290.90
Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
%

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