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

Question

Business

Tiki

5 September, 07:37

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

+2

Answers (1)

Know the Answer?

Abram Barr · Answer 1

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