Question

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

Machine A Machine B Machine C
Estimated Average Income $47,932.64 $85,282.20 $68,037.00
Average Investment $342,376.00 $284,274.00 $453,580.00
Select the correct answer.
Machine B or C
Machine C
Machine A
Machine B

Answer 1

Answer: Machine B

Step-by-step explanation:

Average rate of return = Average Income / Average Investment

Machine A

= 47,932.64/342,376

= 14%

Machine B

= 85,282.20/284,274

= 30%

Machine C

= 68,037/453,580

= 15%

Machine B has best average rate of return.