Question
FutureTech Ltd. needs to choose between three new processing machines. The relevant details are as follows. Assume a tax rate of 25% and an interest
- FutureTech Ltd. needs to choose between three new processing machines. The relevant details are as follows. Assume a tax rate of 25% and an interest on capital of 10%.
Particulars | Machine Alpha (₹) | Machine Beta (₹) | Machine Gamma (₹) |
Initial investment | 3,20,000 | 3,80,000 | 4,00,000 |
Estimated annual sales | 5,20,000 | 4,70,000 | 4,90,000 |
Cost of production: | |||
Direct material | 45,000 | 35,000 | 40,000 |
Direct labour | 55,000 | 45,000 | 50,000 |
Factory overhead | 65,000 | 55,000 | 60,000 |
Administration cost | 25,000 | 20,000 | 30,000 |
Selling & Distribution cost | 15,000 | 10,000 | 20,000 |
- The economic life of machine Alpha is 4 years, while it is 3 years for the other two. The scrap values are ₹35,000, ₹25,000, and ₹30,000 respectively. Calculate the payback period for each machine to determine the best investment.
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
9th edition
978-1285183244, 128518324X, 978-1285779263, 1285779266, 978-1285183237
