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 6,300 units at $281.00 per unit. The equipment has a cost of $703,100, residual value of $52,900, 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. 14 X % $48.00 185.00 31.20 $264.20 Feedback Check My Work Divide the estimated average annual income by the average investment. Estimated average annual income = (Sales price x Sales quantity) - (Unit cost x Units sold)