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2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method,

2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method,

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. Choose from the two machines which is more economical. Machine A First Cost P8,000.00 Salvage Value Annual Operation 3,000 Annual Maintenance 1,200 Taxes and Insurance 3% Life Years 10 Money is worth at least 16%. Prove your answer using three methods. 2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method. Machine B P14,000.00 2,000 2,400 1,000 3% 15
Transcribed Image Text:1. Choose from the two machines which is more economical. Machine A First Cost P8,000.00 Salvage Value Annual Operation 3,000 Annual Maintenance 1,200 Taxes and Insurance 3% Life Years 10 Money is worth at least 16%. Prove your answer using three methods. 2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method. Machine B P14,000.00 2,000 2,400 1,000 3% 15
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