Question

Ray Zor 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 4,000 units at $ 410 per unit. The equipment has a cost of $ 525,000, residual value of $ 75,000, and an eight-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone is shown below.
Cost per unit:
Direct labor .................. $ 30
Direct materials ............... 280
Factory overhead (including depreciation) ...... 40
Total cost per unit ............... $ 350
Determine the average rate of return on the equipment.



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  • CreatedJune 27, 2014
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