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24 December, 17:20

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and has asked the accountant to analyze them to determine the best average rate of return.

Machine A Machine B Machine C

Estimated average income $40,000 $50,000 $75,000

Average investment $300,000 $250,000 $500,000

a. Machine B

b. Machine A

c. Machine B or C

d. Machine C

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  1. 24 December, 21:13
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    Answer: the correct answer is a. Machine B

    Explanation:

    Machine A average rate return

    40000 out of 300000. It means that 300000 is 100% and $ 40000 is X. We apply a simple three rule:

    40000 X X = 4000000/300000

    300000 100% X = 13.33%

    Machine B average rate return

    50000 out of 250000. It means that 250000 is 100% and $ 50000 is X. We apply a simple three rule:

    50000 X X = 5000000/250000

    250000 100% X = 20%

    Machine C average rate return

    $75,000 out of $500,000. It means that $500,000 is 1005 and $75,000 is X. We apply a simple three rule

    $75,000 X X=7500000/500000

    $500,000 100% X = 15%

    The highest average is the one onf Machine B
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