Answered Essay: Hello, given this information I need help finding the project's accounting rate of return.

Pcclcuon ond sales volume 00.000 unns 120000 rts Toan Urit Unl $ 90 Drect materials Total varlatble manufacuring Comribution margn Flxd meufecturing coats s 37 42 5 1.250030 350000 Net opereting Income Required Information 0.40 points 1-a. Coplete the alkowing table showing the Itals (Enter all answers in whole dollars t (no a 30,000 Units and Sales Volurne 120,000 Units Per Init Par Unir lotal 90「S 7,200,000|$ 90| 1000000 Sales Revenue Varistle Coets Diract Matadal Direct Labor 25 riable Manufacturing Overhead Tatal Varlahla Manufacthuring Costs Contribution Margin Ficed Manutacturing Costa 10 53 2,960,000| 1,250,u0C 1,710,00d 42「 ら040,000 2 350,000 2690,000 st

Hello, given this information I need help finding the project’s accounting rate of return.

I have tried 34.71% and its not the right answer…so please help me out with the right answer and show your steps if possible

Pcclcuon ond sales volume 00.000 unns 120000 rts Toan Urit Unl $ 90 Drect materials Total varlatble manufacuring Comribution margn Flxd meufecturing coats s 37 42 5 1.250030 350000 Net opereting Income Required Information 0.40 points 1-a. Coplete the alkowing table showing the Itals (Enter all answers in whole dollars t (no a 30,000 Units and Sales Volurne 120,000 Units Per Init Par Unir lotal 90「S 7,200,000|$ 90| 1000000 Sales Revenue Varistle Coets Diract Matadal Direct Labor 25 riable Manufacturing Overhead Tatal Varlahla Manufacthuring Costs Contribution Margin Ficed Manutacturing Costa 10 53 2,960,000| 1,250,u0C 1,710,00d 42「 ら040,000 2 350,000 2690,000 st

Expert Answer

 

Solution:

Calculation of the Accounting Rate of Return:

Current (No Automation) Proposed (Automation)
Production Sales and Volumes 80,000 Units 120,000 Units
Per Unit Total Per Unit Total
Sales Revenue $90 $7,200,000 $90 $10,800,000
Variable Costs:
Direct Materials $18 $18
Direct Labor $25 $20
Variable Manufacturing Overhead $10 $10
Total Variable Manufacturing Costs $53 $48
Contribution Margin $37 $2,960,000 $42 $5,040,000
Fixed Manufacturing Costs $1,250,000 $2,350,000
Net Operating Profit $1,710,000 $2,690,000

emph{Accounting Rate of Return} = frac{emph{Net Operating Income}}{emph{Initial Investment}}

Net Operating Income = $2,690,000

Initial Investment = $15,000,000

emph{Accounting Rate of Return} = frac{$2,690,000}{$15,000,000}

emph{Accounting Rate of Return} = 17.93%

Therefore, the Accounting Rate of Return is 17.93%.

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