The new managerial accountant at the Recycle Shoppe proposed a method to eliminate waste, recycle a variety of products to enhance sales, and generate profits. The operations manager attended a meeting with the creative manager and proposed that the staff recycle the wood out of the 1,000 old chairs in the warehouse and convert the wood backing into custom picture frames. The operations manager stated that the old wooden chairs in the basement are a fire hazard. The managerial accountant believes that the cost to convert the old wood into custom picture frames is $80,000. The managerial accountant forecasts earnings from the sale of the custom picture frames at $54,000. Compute the payback period, in years. Which of the following illuminates both internal and external costs to give the manager a complete set of information about how to generate cost-effective solutions to environmental and social concerns?

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflows. Here, the initial investment is $80,000, and the forecasted earnings (which can be considered as annual cash inflows for simplicity) are $54,000. So, the payback period is $80,000 / $54,000 = 1.48 years, rounded to 1.48 for precision. Life-cycle assessment illuminates both internal and external costs, providing a comprehensive view of environmental and social concerns related to a product's entire life cycle.

The New Managerial Accountant at the Recycle Shoppe Proposed a Method