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 $588,000 and it is expected to have a six-year life with annual depreciation expense of $98,000 and now salvage value. Annual sales from the new facility are expected to be 2,030 units with a price of $1,020 per unit. Variable production costs are $560 per unit, while fixed cash expenses are $84,000 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?
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