Answered: Machine First Cost, $ АОС, $ 1 -28,000…

Business

Accounting

Machine First Cost, $ АОС, $ 1 -28,000 - 20,000 - 12,000 - 19,000 2 -51,000 3 -32,000 4 -33,000 - 18,000

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.2E: Identify cost graphs The following cost graphs illustrate various types of cost behavior: For each...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Old Southwest Canning Co. has determined that any one of four machines can be used in a certain phase of its chili-canning operation. The first costs
and annual operating costs (AOC) are estimated below, and all machines have a 5-year life. The MARR is 25% per year. (a) Determine which machine should be selected on the basis of a rate of return analysis. (b) Use a spreadsheet to perform PW analysis of each machine. Compare the machine selections with that of the ROR analysis.

Machine
First Cost, $
АОС, $
1
-28,000
- 20,000
- 12,000
- 19,000
2
-51,000
3
-32,000
4
-33,000
- 18,000

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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