Answered: Micro Tek Inc. is considering an…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3E: Average rate of returnnew product Hana Inc. is considering an investment in new equipment that will...

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Average Rate of Return—New Product

Micro Tek 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 7,000 units at $272 per unit. The equipment has a cost of $651,000, residual value of $49,000, and an eight-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows:

Cost per unit:
	Direct labor	$47.00
	Direct materials	183.00
	Factory overhead (including depreciation)	31.50
		Total cost per unit	$261.50

Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
fill in the blank 1 %

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