A company's prime costs total $4,800,000 and its conversion costs total $8,800,000. if direct materials are $1,900,000 and facto
1 answer:
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Answer: 2.74 years
Explanation:
Payback Period is a method of capital budgeting that works by checking how long the project will take to repay the investment outlay.
The formula is;
Payback Period = Year before Payback Period occurs +
Initial Outlay = $4,650
First Year = $1,350
Second Year = $2,450
Third Year = $1,150
First year + second year = 1,350 + 2,450 = $3,800
Remaining till repayment = 4,650 - 3,800 = $850
Third year amount of $1,150 is higher than $850 so amount will be repaid in 3rd year.
Payback Period = Year before Payback Period occurs +
Payback Period = 2 +
Payback Period = 2.74 years
