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Find the average rate of return on the equipment

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Reference no: EM132690419

Problem - Average rate of return-new product - I-Mobile Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications device. The device is expected to generate additional annual sales of 2,100 units at $370 per unit. The equipment has a cost of $920,000, residual value of $88,000, and an eight-year life. The equipment can only be used to manufacture the device. The cost to manufacture the device is shown below.

Cost per unit:

Direct labor $45

Direct materials 170

Factory overhead (including depreciation) 35

Total cost per unit $250

Required - Find the average rate of return on the equipment.

Reference no: EM132690419

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