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rane-mounted pr end of its estima 2% of the first co pment is capable ment, two labore

rane-mounted pr end of its estima 2% of the first co pment is capable ment, two labore

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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3. A contractor won a bid to repave so many kilometers of a badly damaged concrete road in the south. He is offered a crane-mounted pneumatic breaker which will cost P 1,200,000 with a salvage value of P 150,000 at the end of its estimated life of 15 years. The annual cost of maintenance, taxes, licenses and insurance is 12% of the first cost, regardless of how the equipment is used. The variable cost is P 550 per day. The equipment is capable of breaking 30 sq.m. of 20-centimeter-thick of concrete road per day. Without equipment, two laborers receiving P 50 each per day could break an average of one sq.m. of the same road per day. How many sq.m. of the road per year must the equipment break to make the machine an economical investment? Assume interest on investment to be 12% of the first cost.
Transcribed Image Text:3. A contractor won a bid to repave so many kilometers of a badly damaged concrete road in the south. He is offered a crane-mounted pneumatic breaker which will cost P 1,200,000 with a salvage value of P 150,000 at the end of its estimated life of 15 years. The annual cost of maintenance, taxes, licenses and insurance is 12% of the first cost, regardless of how the equipment is used. The variable cost is P 550 per day. The equipment is capable of breaking 30 sq.m. of 20-centimeter-thick of concrete road per day. Without equipment, two laborers receiving P 50 each per day could break an average of one sq.m. of the same road per day. How many sq.m. of the road per year must the equipment break to make the machine an economical investment? Assume interest on investment to be 12% of the first cost.
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