Question
Break even analysis The marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of the new facility
Break even analysis
The marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of the new facility is $630,000 and it is expected to have a six-year life with annual depreciation expense of $105,000 and now salvage value. Annual sales from the new facility are expected to be 1,950 units with a price of $1,000 per unit. Variable production costs are $560 per unit, and while fixed cash expenses are $79,000 per year.
a. Find the accounting and the cash break-even units of production.
b. Will the plant make a profit based on its current expected level of operations?
c. Will the plant contribute cash flow to the firm at the expected level of operations?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started