2. The Paktika Apple Orchard has always hired part-time workers to pick its annual apple crop. Fetullah Wasim, overseer of the orchard, has just received information on an apple picking machine that is being purchased by many competing orchards. The machine is a motorized device that shakes the apple tree, causing the apples to fall onto plastic tarps that funnel the apples into crates for shipping. Fetullah has gathered the following information to decide whether an apple picking machine would be a profitable investment for the Paktika Apple Orchard: a. Currently, the orchard is paying an average of $40,000 per year to transient workers to pick the apples. b. The apple picker would cost $94,500, and it would have an estimated 12-year useful life. The orchard uses straight-line depreciation on all assets and considers salvage value in computing depreciation deductions. The estimated salvage value of the cherry picker is $4,500. C. Annual out-of-pocket costs associated with the apple picker would be: cost of an operator and an assistant, $14,000; insurance, $200; fuel, $1,800; and a maintenance contract, $3,000.

2. The Paktika Apple Orchard has always hired part-time workers to pick its annual apple crop. Fetullah Wasim, overseer of the orchard, has just received information on an apple picking machine that is being purchased by many competing orchards. The machine is a motorized device that shakes the apple tree, causing the apples to fall onto plastic tarps that funnel the apples into crates for shipping. Fetullah has gathered the following information to decide whether an apple picking machine would be a profitable investment for the Paktika Apple Orchard: a. Currently, the orchard is paying an average of $40,000 per year to transient workers to pick the apples. b. The apple picker would cost $94,500, and it would have an estimated 12-year useful life. The orchard uses straight-line depreciation on all assets and considers salvage value in computing depreciation deductions. The estimated salvage value of the cherry picker is $4,500. C. Annual out-of-pocket costs associated with the apple picker would be: cost of an operator and an assistant, $14,000; insurance, $200; fuel, $1,800; and a maintenance contract, $3,000.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 17E

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