Question
Average Rate of Return-New Product Hana Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone
Average Rate of Return-New Product Hana 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 3,500 units at $228 per unit. The equipment has a cost of $293,000, residual value of $22,000, and an 8-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 $37.00 145.00 25.75 $207.75 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. 22 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. G
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