Question

Average Rate of Return-New Product Galactic 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 4,900 units at $311 per unit. The equipment has a cost of $501,300, residual value of $37,700, 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 Direct materials Factory overhead (including depreciation) $53.00 207.00 35.05 $295.05 Total cost per unit Determine the average rate of return on the equipment. If required, round to the nearest whole percent.

Answer 1

Net income = (311-295.05)*4900-57950 = 20205

Average investment = (501300+37700/2) = 269500

Average rate of return = Net income/Average investment = 20205/269500 = 7%

Answer 2

Add your answer here! My answer to this question is as follows:

Average Rate of Return on Equipment

($250 - $182.50) * 6000 = $405,000

($850,000 + $50,000/2) = $450,000

Rate of Return in the nearest whole percent is:

$405,000/$450,000 = 90%

Answer 3

Hana 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 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:

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

Determine the average rate of return on the equipment.