Pocket Communications Inc. is considering an investment in new equipment that will be used to manufacture a PDA (personal data assistant). The PDA is expected to generate additional annual sales of 4,500 units at $325 per unit. The equipment has a cost of $870,000, residual value of $30,000, and a 10-year life. The equipment can only be used to manufacture the PDA. The cost to manufacture the PDA is shown below.Cost per unit:Direct labor …………… $ 42.00Direct materials ………… .. 195.00Factory overhead (including depreciation)… 58.00Total cost per unit …………. $295.00Determine the average rate of return on the equipment.View Solution:
Pocket Communications Inc is considering an investment in new e