Wamser Service Center just purchased an automobile hoist for ($39,000). The hoist has an 8-year life and

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Wamser Service Center just purchased an automobile hoist for \($39,000\). The hoist has an 8-year life and an estimated salvage value of \($3,000\). Installation costs and freight charges were \($3,300\) and \($700\), respectively. Wamser uses straight-line depreciation.

The new hoist will be used to replace mufflers and tires on automobiles. Wamser es- timates that the new hoist will enable his mechanics to replace four extra mufflers per week. Each muffler sells for \($70\) installed. The cost of a muffler is \($30\), and the labor cost to install a muffler is $10.

Instructions

(a) Compute the payback period for the new hoist.

(b) Compute the annual rate of return for the new hoist. (Round to one decimal.)

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Managerial Accounting Tools For Business Decision Making

ISBN: 9780471413653

2nd Canadian Edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly

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