The Management of Duker Corporation Is Investigating Purchasing Equipment That

question 58

Multiple Choice

The management of Duker Corporation is investigating purchasing equipment that would increase sales revenues by $130,000 per year and cash operating expenses by $39,000 per year. The equipment would cost $328,000 and have an 8 year life with no salvage value. The simple rate of return on the investment is closest to:

• A)12.5%
• B)27.7%
• C)38.5%
• D)15.2%

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Definitions:

Direct Labor

The wages and related expenses for workers who are directly involved in the production of goods or services.

Raw Material

Basic materials used in the manufacturing process to produce finished goods.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including both materials and labor costs.

Raw Material

Basic materials or substances used in the manufacturing or production process to create goods and products.