A company is considering three types of equipment for its manufacturing plant. Pertinent data are as...

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A company is considering three types of equipment for its manufacturing plant. Pertinent data are as follows: First cost Annual operating cost Annual labor cost Insurance and property taxes Payroll taxes Estimated life Type A P170,000 P32,000 P55,000 2% 4.5% 10 Type B P210,000 P26,000 P45,000 2% 4.5% 10 Type C P260,000 P22,000 P36,000 2% 4.5% 10 If the minimum required rate of return is 15%, which equipment should be selected? Use: By the Annual Cost Method (15 pts.) 2) A machine was purchased 5 years ago at a cost of P 65,000. It was estimated to have a useful life of 10 years, with a salvage value of P3,000. It is now going to be replaced by a new machine costing P73,000 and a P32,000 trade-in will be allowed for the old machine. Determine the sunk cost if depreciation has been computed by the (a) straight-line method (b) sinking fund method at 13%, and (c) SYD method. (d) double declining balance method. (5 pts each) A company is considering three types of equipment for its manufacturing plant. Pertinent data are as follows: First cost Annual operating cost Annual labor cost Insurance and property taxes Payroll taxes Estimated life Type A P170,000 P32,000 P55,000 2% 4.5% 10 Type B P210,000 P26,000 P45,000 2% 4.5% 10 Type C P260,000 P22,000 P36,000 2% 4.5% 10 If the minimum required rate of return is 15%, which equipment should be selected? Use: By the Annual Cost Method (15 pts.) 2) A machine was purchased 5 years ago at a cost of P 65,000. It was estimated to have a useful life of 10 years, with a salvage value of P3,000. It is now going to be replaced by a new machine costing P73,000 and a P32,000 trade-in will be allowed for the old machine. Determine the sunk cost if depreciation has been computed by the (a) straight-line method (b) sinking fund method at 13%, and (c) SYD method. (d) double declining balance method. (5 pts each)

Answer rating: 100% (QA)

1 To determine which equipment should be selected based on the minimum required rate of return of 15 we will use the Annual Cost Method The Annual Cost Method compares the total annual costs of each e... View the full answer