DEF Enterprises plans to upgrade its production line by purchasing a new machine. Three machines...
90.2K
Verified Solution
Link Copied!
Question
Accounting
DEF Enterprises plans to upgrade its production line by purchasing a new machine. Three machines are being considered. The details of estimated yearly expenditure and sales are provided below. All sales are on cash basis. Corporate income-tax rate is 38%. Interest on capital may be assumed to be 7%.
Particulars | Machine 1 (Rs) | Machine 2 (Rs) | Machine 3 (Rs) |
Initial investment | 3,50,000 | 4,00,000 | 3,75,000 |
Estimated annual sales | 5,50,000 | 6,00,000 | 5,75,000 |
Cost of production: | |||
Direct material | 45,000 | 50,000 | 48,000 |
Direct labour | 55,000 | 60,000 | 57,000 |
Factory overhead | 65,000 | 70,000 | 68,000 |
Administration cost | 22,000 | 24,000 | 23,000 |
Selling & Distribution cost | 14,000 | 16,000 | 15,000 |
The economic life of machine 1 is 3 years, while it is 2 years for the other two. The scrap values are Rs. 45,000, Rs. 55,000 and Rs. 50,000 respectively. Determine the most profitable investment based on the payback period method.
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.