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Hello, given this information I need help finding the project’s accounting rate of return.
I have tried 34.71% and its not the right answer…so please help me out with the right answer and show your steps if possible
Pcclcuon ond sales volume 00.000 unns 120000 rts Toan Urit Unl $ 90 Drect materials Total varlatble manufacuring Comribution margn Flxd meufecturing coats s 37 42 5 1.250030 350000 Net opereting Income Required Information 0.40 points 1-a. Coplete the alkowing table showing the Itals (Enter all answers in whole dollars t (no a 30,000 Units and Sales Volurne 120,000 Units Per Init Par Unir lotal 90「S 7,200,000|$ 90| 1000000 Sales Revenue Varistle Coets Diract Matadal Direct Labor 25 riable Manufacturing Overhead Tatal Varlahla Manufacthuring Costs Contribution Margin Ficed Manutacturing Costa 10 53 2,960,000| 1,250,u0C 1,710,00d 42「 ら040,000 2 350,000 2690,000 st
Expert Answer
Solution:
Calculation of the Accounting Rate of Return:
| Current (No Automation) | Proposed (Automation) | |||
| Production Sales and Volumes | 80,000 Units | 120,000 Units | ||
| Per Unit | Total | Per Unit | Total | |
| Sales Revenue | $90 | $7,200,000 | $90 | $10,800,000 |
| Variable Costs: | ||||
| Direct Materials | $18 | $18 | ||
| Direct Labor | $25 | $20 | ||
| Variable Manufacturing Overhead | $10 | $10 | ||
| Total Variable Manufacturing Costs | $53 | $48 | ||
| Contribution Margin | $37 | $2,960,000 | $42 | $5,040,000 |
| Fixed Manufacturing Costs | $1,250,000 | $2,350,000 | ||
| Net Operating Profit | $1,710,000 | $2,690,000 | ||
Net Operating Income = $2,690,000
Initial Investment = $15,000,000
Therefore, the Accounting Rate of Return is 17.93%.
