Problem 08.023- Determine which robot to select based on incremental rate of returnA process control manager is considering two robots to improve materials-handling capacity in the production of rigid shaft couplingsthat make dissimilar drive components. Robot X has a first cost of $92,000, an annual M&O cost of $31,000, and $44,000 salvagevalue, and it will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, and$47,000 salvage value, and it will increase revenues by $129,000 per year. The company's MARR is 19.00% per year, and it uses a 3-year study period for economic evaluations. Calculate the incremental ROR, and identify the robot the manager should select. (Roundthe final answer to three decimal places.)The incremental ROR is%.The manager should select robot Y

Incremental rate of return refers to the return that is earned on the higher of the cash flow of…

Answered: A process control manager is…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 13E

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A process control manager is considering two robots to improve materials handling capacity in the production of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of $84,000, an annual M&O cost of $31,000, a $40,000 salvage value, and will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, a $47,000 salvage value, and will increase revenues by $119,000 per year. The company’s MARR is 15% per year and it uses a 3-year study period for economic evaluations. Which one should the manager select (a) on the basis of ROR values, and (b) on the basis of the incremental ROR value? (c) Which is the correct selection basis? Perform the analysis by hand or spreadsheet, as instructed.
Q18. A process control manager is considering two robots to improve materials-handling capacity in the production of rigid shaft couplings that make dissimilar drive components. Robot X has a first cost of $76,000, an annual M&O cost of $31,000, and $42,000 salvage value, and it will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, and $47,000 salvage value, and it will increase revenues by $121,000 per year. The company’s MARR is 46% per year, and it uses a 3-year study period for economic evaluations. Calculate the incremental ROR, and identify the robot the manager should select. The incremental ROR is The manager should select robot ?
A mechanical engineer is considering two robots for improving materials handling in the production of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of $84,000, an annual maintenance and operation (M&O) cost of $31,000, a $40,000 salvage value, and will improve net revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, a $47,000 salvage value, and will increase net revenues by $119,000 per year. Which one should be selected on the basis of a rate of return analysis if the company’s MARR is 15% per year? Use a three-year study period.
Calculate the profitability of the following proposal using Return on investment method Proposal I Automatic machine Cost 420000 Estimated life 6.5 years Estimated sales p.a 175000 Cost : Material 60000 Labor 22000 Variable overheads 14000 a. 16.53% b. All the options are wrong c. 3.42% d. 4.62%
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