Question

A Assumptions • Cost of new shrinkwrap machine plus installation = $25,000 • Average wait time per warehouse picker per day = 30 minutes • Number of warehouse pickers = 12 • Hourly wage of warehouse personnel = $20.00 • Foodbank is open 5 days a week, 52 weeks a year, except for 10 holidays • Expected useful life of machine = 10 years • Expected salvage value = $2,100

Answer 1

Answer with working is given below

260 Working days Total Days (5 days week X 52 weeks) Less: Holidays Net Working days 10 250 30 minutes 12 Cash inflow Wait time Number of warehouse pickers Total hours per day ( 30 min X12)/60 min hourly wage Total wages per day Annual working days Annual cash inflow $20 $120.00 250 $30,000 2 Payback period Initial Investment Annual cash inflow $25,000 $30,000 0.83 3 $24 Revised Cash inflow Hourly wage revised increased 20% Total wages per day Annual working days Annual cash inflow $144 250 $36,000 Payback period Initial Investment Annual cash inflow $25,000 0.69 $36,000) payback period decreased Reason is since the labor cost increased the cash inflow savings also increased. When cash inflow is increased the initial investment is recovered early and payback period is decreased