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

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

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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