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AC505 Project B - AC505 Capital Budgeting problem Data Cost...

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AC505 Capital Budgeting problem Data: Cost of new equipment $200,000 Expected life of equipment in years 5 Disposal value in 5 years $40,000 Life production - number of cans 5,500,000 Annual production or purchase needs 1,100,000 Initial training costs 15,000 Number of workers needed 3 Annual hours to be worked per employee 2000 Earnings per hour for employees $12.00 Annual health benefits per employee $2,500 Other annual benefits per employee-% of wages 18% Cost of raw materials per can $0.25 Other variable production costs per can $0.05 Costs to purchase cans - per can $0.45 Required rate of return 12% Tax rate 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1,100,000 cans per year $330,000 (Raw + Variable) x # of Units Annual cost of direct labor for new employees: Wages $72,000 Hours x # of employees x earnings per hour Health benefits $7,500 Benefits x # of employees Other benefits $12,960 Wages x 18% Total wages and benefits $92,460 Add 3 colums above Total annual production costs $422,460 Add all colums above Annual cost to purchase cans $495,000 Cost per can x # of cans
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