# Managerial Accounting: E12-9 Alameda Service Center just purchased an automobile hoist

Managerial Accounting

E12-9

Alameda Service Center just purchased an automobile hoist for $41,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300 and $700, respectively. Peyton uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Peyton estimates that the new hoist will enable his mechanics to replace five extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $34, and the labor cost to install a muffler is $12.

Instructions:

1. Compute the cash payback period for the new hoist. (Round answer to 2 decimal places, e.g. 10.50.)

2. Compute the annual rate of return for the new hoist. (Round answer to 1 decimal place, e.g. 10.5.)

E12-9

Alameda Service Center just purchased an automobile hoist for $41,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300 and $700, respectively. Peyton uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Peyton estimates that the new hoist will enable his mechanics to replace five extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $34, and the labor cost to install a muffler is $12.

Instructions:

1. Compute the cash payback period for the new hoist. (Round answer to 2 decimal places, e.g. 10.50.)

2. Compute the annual rate of return for the new hoist. (Round answer to 1 decimal place, e.g. 10.5.)

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