ACCT 505 Course Project 2 by Charlie An 20161011 - DeVry...

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DeVry University Keller Graduate School of Management Pomona, California Course Project 2 Capital Budgeting Decision By Charlie An / [email protected] Mangerial Accounting ACCT 505 / Sept - Oct TERM Prof. Phan, Cindy Submitted on October 16th, 2016
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ACCT505 Project 2 by Charlie K An Capital Budgeting Problem Solution Hampton Company Data: Cost of new equipment $1,000,000 Expected life of equipment in years 5 Disposal value in 5 years $200,000 Life production—number of cans 27,500,000 Annual production or purchase needs 5,500,000 Initial training costs 0 Number of workers needed 6 Annual hours to be worked per employee 2,000 Earnings per hour for employees $15.00 Annual health benefits per employee $2,000 Other annual benefits per employee—% of wages 15% Cost of raw materials per can $0.30 Other variable production costs per can $0.10 Costs to purchase cans—per can $0.50 Required rate of return 11% Tax rate 35% Make Purchase Cost to Produce Annual cost of direct material: Need of 5.5 million cans per year $1,650,000 Annual cost of direct labor for new employees: Wages 180,000
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