Determine the average rate of return on the equipment

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Reference no: EM133052722

Question - Average Rate of Return-New Product - Micro Tek Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 3,600 units at $226 per unit. The equipment has a cost of $334,800, residual value of $25,200, and an eight-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows:

Cost per unit:

Direct labor $37.00

Direct materials 145.00

Factory overhead (including depreciation) 25.50

Total cost per unit $207.50

Determine the average rate of return on the equipment. If required, round to the nearest whole percent.

Reference no: EM133052722

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