A small manufacturer that makes clothespins and other household products buys new injection molding equipment for a cost of $500,000.This will allow the manufacturer to make more clothespins in the same amount of time with an estimated increase in sales of 15%.If the manufacturer currently makes 75 tons of clothespins per year,which sell at $18,000 per ton,what will be the increase in revenue next year from the new equipment?

Question

Quizplus · Accepted Answer

Current revenue from clothespins = 75 tons/year x $18,000/ton = $1,350,000/year
Estimated increase in sales due to new equipment = 15%
New revenue from clothespins = ($1,350,000/year x 1.15) = $1,552,500/year
Increase in revenue = $1,552,500/year - $1,350,000/year = $202,500
Therefore, the increase in revenue next year from the new equipment will be $202,500. The correct answer is (C).

A Small Manufacturer That Makes Clothespins and Other Household Products