I-Mobile Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications device. The device is expected to generate additional annual sales of 2,100 units at $370 per unit. The quipment has a cost of $920,000, residual value of $88,000, and an eight year life. The equipment can only be used to manufacture the device. The cost to manufacture the devise is shown below:
- Cost per unit:
- Direct labor: 45.00
- Direct materials: 170.00
- Factory overhead (including depreciation) 35.00
- Total cost per unit: 250.00
- Determine the average rate of return on the equipment.