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X Company currently buys 8,000 units of a part each year from a supplier for $7.60 each, but it is considering making the part instead. In order to make the part, X Company will have to buy equipment that will cost $150,000. The equipment will last for 6 years, at which time it will have zero disposal value. X Company estimates that it will cost $33,110 a year to make the 8,000 units. What is the approximate rate of return if X Company makes the part instead of buying it from the supplier?

X Company currently buys 8,000 units of a part each year from a supplier for $7.60 each, but it is considering making the part instead. In order to make the part, X Company will have to buy equipment that will cost $150,000. The equipment will last for 6 years, at which time it will have zero disposal value. X Company estimates that it will cost $33,110 a year to make the 8,000 units. What is the approximate rate of return if X Company makes the part instead of buying it from the supplier?

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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X Company currently buys 8,000 units of a part each year from a supplier for $7.60 each, but it is considering making the part instead. In order to make the part, X Company will have to buy equipment that will cost $150,000. The equipment will last for 6 years, at which time it will have zero disposal value. X Company estimates that it will cost $33,110 a year to make the 8,000 units. What is the approximate rate of return if X Company makes the part instead of buying it from the supplier?
Transcribed Image Text:X Company currently buys 8,000 units of a part each year from a supplier for $7.60 each, but it is considering making the part instead. In order to make the part, X Company will have to buy equipment that will cost $150,000. The equipment will last for 6 years, at which time it will have zero disposal value. X Company estimates that it will cost $33,110 a year to make the 8,000 units. What is the approximate rate of return if X Company makes the part instead of buying it from the supplier?
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