Three mutually exclusive design alternatives are being considered. The estimated

Question

Three mutually exclusive design alternatives are
being considered. The estimated sales and cost data for each alternative are given on p. 292. The MARR is 20%
per year. Annual revenues are based on the number
of units sold and the selling price. Annual expenses
are based on fixed and variable costs. Determine
which selection is preferable based on AW. State your
assumptions.

6-4. Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for Investment cost$30,000 $60,000 $50,000 Estimated units 15,000 20,000 18,000 to be sold/year Unit selling price, 3.50 $4.40 $4.10 $/unit Variable costs, $/unit $1.00 $1.40 $1.15 Annual expenses $15,000 $30,000 $26,000 0 $20,000 $15,000 (fixed) Market value Useful life 10 years 10 years 10 years

Explanation / Answer

Answer:

Alternative B is selected

Particulars A B C Investment cost 30000 60000 50000 revenue 52500 88000 73800 Less: variable 15000 28000 20700 Contribution 37500 60000 53100 Less: Annual expenses 15000 30000 26000 Net income 22500 30000 27100

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