In building a plant, the Santos Novelty Corporation had the choice between three alternatives: One alternative is to build in San Mateo, Rizal where the plant would cost P2,000,000. Annual labor would cost P120,000 and annual overhead cost of P40,000. Taxes and insurance would total 5% of the first cost of the plant. The second alternative would be to build in Montalban Rizal where the plant would cost P1,950,000. Labor would cost annually P115,000 and overhead would be P50,000. Taxes and insurance would be 4% of the first cost. The third alternative would be to build in Marikina City a plant costing P2,250,000. Labor would cost annually P100,000 and overhead would be P55,000. Taxes and insurance would be 3% of the first cost. The cost of raw materials would be the same in other plant. If capital must be recovered within 10 years and money is worth at least 20%, which site should the officers of the company choose? Use Future Worth Cost Method
In building a plant, the Santos Novelty Corporation had the choice between three alternatives: One alternative is to build in San Mateo, Rizal where the plant would cost P2,000,000. Annual labor would cost P120,000 and annual overhead cost of P40,000. Taxes and insurance would total 5% of the first cost of the plant. The second alternative would be to build in Montalban Rizal where the plant would cost P1,950,000. Labor would cost annually P115,000 and overhead would be P50,000. Taxes and insurance would be 4% of the first cost. The third alternative would be to build in Marikina City a plant costing P2,250,000. Labor would cost annually P100,000 and overhead would be P55,000. Taxes and insurance would be 3% of the first cost. The cost of raw materials would be the same in other plant. If capital must be recovered within 10 years and money is worth at least 20%, which site should the officers of the company choose? Use Future Worth Cost Method
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter1: Introduction And Goals Of The Firm
Section: Chapter Questions
Problem 2.2CE
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In building a plant, the Santos Novelty Corporation had the choice between three alternatives:
One alternative is to build in San Mateo, Rizal where the plant would cost P2,000,000. Annual labor would cost P120,000 and annual overhead cost of P40,000. Taxes and insurance would total 5% of the first cost of the plant.
The second alternative would be to build in Montalban Rizal where the plant would cost P1,950,000. Labor would cost annually P115,000 and overhead would be P50,000. Taxes and insurance would be 4% of the first cost.
The third alternative would be to build in Marikina City a plant costing P2,250,000. Labor would cost annually P100,000 and overhead would be P55,000. Taxes and insurance would be 3% of the first cost.
The cost of raw materials would be the same in other plant. If capital must be recovered within 10 years and money is worth at least 20%, which site should the officers of the company choose? Use Future Worth Cost Method.
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