Holland Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $259,000. The equipment will have an initial cost of $1,008,000 and have a 8-year life. If there is no salvage value of the equipment, what is the payback period?

• 3.89 years

• 2.06 years

• 2.62 years

• 8.00 years

Buffalo Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $138,000 over its estimated life, while the total cost to buy the equipment will be $84,000 over its estimated life.

At Buffalos required rate of return (hurdle rate), the net present value of the cost of leasing the equipment is $77,000 and the net present value of the cost of buying the equipment is $71,000. Based on financial factors, Buffalo should:

• buy the equipment, saving $54,000 over leasing.

• buy the equipment, saving $6,000 over leasing.

• lease the equipment, saving $6,000 over buying.

• lease the equipment, saving $54,000 over buying.

Washtenaw Company had the following information for the year:

Direct materials used	$	118,400
Direct labor incurred (5,600 hours)	$	157,500
Actual manufacturing overhead incurred	$	172,200

Washtenaw Company used a predetermined overhead rate of $37 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,100. What was cost of goods manufactured during the year?

• $448,100

• $457,200

• $275,900

• $466,000