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Average Rate of Return-New Product Galactic Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone
Average Rate of Return-New Product Galactic Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 6,200 units at $213 per unit. The equipment has a cost of $634,300, residual value of $47,700, and an eight-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor Direct materials Factory overhead (including depreciation) Total cost per unit $34.00 134.00 23.00 $191.00 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. X % Feedback Check My Work Divide the estimated average annual income by the average investment. Sales price x units sold, less unit cost x units sold, equals average annual income. Learning Objective 2.
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