Earths Bounty, Inc., is planning to invest in new manufacturing equipment to make a new garden tool.
Question:
Earth’s Bounty, Inc., is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 10,000 units at $58 each. The new manufacturing equipment will cost $177,000 and is expected to have a 10-year life and $13,000 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the
product includes the following on a per-unit basis:
Direct labor...............................................................$ 8.00
Direct materials.........................................................35.00
Fixed factory overhead—depreciation.....................1.64
Variable factory overhead..........................................4.20
Total...........................................................................$48.84
Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project.
Step by Step Answer:
Financial and Managerial Accounting Using Excel for Success
ISBN: 978-1111993979
1st edition
Authors: James Reeve, Carl S. Warren, Jonathan Duchac