Question
A. A company is considering the purchase of a new machine for $115,560. Management predicts that the machine can produce sales of $25,000 each year
A.
A company is considering the purchase of a new machine for $115,560. Management predicts that the machine can produce sales of $25,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $20,800 per year, including depreciation of $6,600 per year. What is the payback period for the new machine?
Multiple Choice
13.80 years.
7.80 years.
10.70 years.
21.80 years.
9.30 years.
B.
A company is planning to purchase a machine that will cost $61,632, have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?
Sales | $ 216,000 | |
---|---|---|
Costs: | ||
Manufacturing | $ 129,600 | |
Depreciation on machine | 4,000 | |
Selling and administrative expenses | 72,000 | (205,600) |
Income | $ 10,400 |
Multiple Choice
6.42 years.
12.84 years.
25.68 years.
1.07 year.
4.28 years.
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