ABC Manufacturing Co. is planning to buy a new machine to improve production efficiency. Three...
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ABC Manufacturing Co. is planning to buy a new machine to improve production efficiency. Three machines are available for consideration. The details are as follows. Assume all sales are on cash. The corporate income-tax rate is 30%. Interest on capital may be assumed to be 11%.
Particulars | Machine X(Rs) | Machine Y(Rs) | Machine Z(Rs) |
Initial investment | 5,00,000 | 4,00,000 | 4,50,000 |
Estimated annual sales | 6,50,000 | 5,50,000 | 5,80,000 |
Cost of production: | |||
Direct material | 70,000 | 65,000 | 60,000 |
Direct labour | 55,000 | 45,000 | 50,000 |
Factory overhead | 85,000 | 75,000 | 70,000 |
Administration cost | 20,000 | 18,000 | 15,000 |
Selling & Distribution cost | 12,000 | 10,000 | 8,000 |
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