Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Saxon Products, Inc., is investigating the purchase of a robot for use on the company's assembly line Selected data relating to the robot are provided

image text in transcribed
Saxon Products, Inc., is investigating the purchase of a robot for use on the company's assembly line Selected data relating to the robot are provided below. Cost of the robot Installation and software Annual savings in inventory carrying costs Annual increase in power and maintenance costs Salvage value in 5 years Useful Life $1,500,000 $ 400,000 $ 221,000 5 41.000 $ 70,000 5 years Engineering studies suggest that use of the robot will result in a savings of 22,000 direct labor hours each year. The labor rate is $16 per hour. Also, the smoother work flow made possible by the use of automation will allow the company to reduce the amount of Inventory on hand by $411,000. This inventory reduction will take place at the end of the first year of operation the released funds will be available for use elsewhere in the company, Saxon Products has a 20% required rate of return Click here to view Exhibit 148:1 and Exhibit:148:2. to determine the appropriate discount factor(s) using tables Required: 1. Determine the annual net cost savings if the robot is purchased. (Do not include the $411,000 inventory reduction or the salvage value in this computation) 2-a. Compute the net present value of the proposed Investment in the robot. 2.b. Based on these data, would you recommend that the robot be purchased? 3-a. Assume that the robot is purchased. However, due to unforeseen problems, software and installation costs were $86,000 more than estimated and direct labor could only be reduced by 18,000 hours per year rather than the original estimate of 22,000 hours Assuming that all other cost data is accurate, what would a postaudit suggest is the actual net present value of this investment? 3-b. Does it appear that the company made a wise investment? 4-a. Which of the following are intangible benefits associated with the new automated equipment?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essays On The Quality Of Audited Financial Statements

Authors: Ulf Mohrmann

1st Edition

3832541853, 978-3832541859

More Books

Students also viewed these Accounting questions

Question

3. List ways to manage relationship dynamics

Answered: 1 week ago