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Problem 21 Capital Budgeting DeSteur Plastics Limited (DPL) manufactures a wide range of household plastic products for kitchens and bathrooms. The company's products are sold

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Problem 21 Capital Budgeting DeSteur Plastics Limited (DPL) manufactures a wide range of household plastic products for kitchens and bathrooms. The company's products are sold primarily to large retailers, including department stores, discount chains, and grocery chains. One of DPL's products is a line of plastic dishware that is sold prepackaged as 4piece place settings. DPL sells the dishes to the retailers at $8.00 per set, and has in recent years been operating at or near the limited capacity of the equipment, which is approximately 500,000 sets per year. The costs of producing the dishes have been determined by DPL's bookkeeper as follows: Material $2.00 per set Direct labour 1.60 Factor overheads: Assignable variable .60 Allocated fixed .40 Equipment depreciation .15 Selling, delivery and administration A Total cost per set 33$ The selling, delivery and administration costs are those that are identifiable with the product, and are essentially variable. The equipment used for the dishes is old and substantially depreciated, and will have to be retired or replaced within the next two years. Its present book value is $130,000, although it would probably fetch only about $15,000 scrap value (or twice that on a trade- in). The equipment has no other uses within DPL. A major grocery chain that is not a regular customer of DPL approaches the company in late 20x2 and offered to buy 700,000 sets per year for at least four years to use in special An A Fun

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