Perform a Cost-Benefit Analysis with Payback Period Calculation Using the Following

question 51

Multiple Choice

Perform a cost-benefit analysis with payback period calculation using the following data: Direct Costs
• 12 laptops-$1,400/each
• A server-$2,000
• Network installation-$14,000
• Software-$20,000
Indirect Costs
• Training-$15,000
Annualized Benefits
• Increased capacity-$200,000

• A) Total costs are $37,400 with a payback period of 0.19 years.
• B) Total costs are $37,400 with a payback period of 0.21 years.
• C) Total costs are $52,400 with a payback period of 0.25 years.
• D) Total costs are $52,800 with a payback period of 0.26 years.
• E) Total costs are $67,800 with a payback period of 0.34 years.

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Definitions:

Relevant Range

The span of activity levels within which the assumptions made about cost behavior and business operations are valid.

Variable Cost

Financial outlays that change directly with changes in production or sales amounts, such as direct labor and raw materials.

Incremental Manufacturing Cost

The additional costs incurred when increasing production by one additional unit.

Production Increase

Refers to the rise in the quantity of goods or services that a company produces over a given period.