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