Question
Average Rate of Return-New Product Arrowhead Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications product.
Average Rate of Return-New Product Arrowhead Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications product. The product is expected to generate additional annual sales of 3,500 units at $227.00 per unit. The equipment has a cost of $390,600, residual value of $29,400, and an 8-year life. The equipment only can be used to manufacture the product. The cost to manufacture the product is shown next. Cost per unit: Direct labor Direct materials Factory overhead (including depreciation) Total cost per unit Determine the average rate of return on the equipment. $39.00 150.00 25.40 $214.40 %
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