Simon Teguh is considering investing in a vending machine operation involving 20 vending machines iocated in various plants around the city. The machine manulacturer reports that similar vending rachine routes have produced a sales volurne ranging fram 600 to 800 units per machine pef month. The following information is made available to Teguh in evaluating the possible profitability of the operation. 1. An investment of $45,000 will be required, $9,000 for merchandise and $36,000 for the 20 machines. 2. The machines have a service life of five years and no salvage value at the end of that period. Depreciation will be compated on the stralght-line basks. 3. The merchandise (candy and solt drinks) retais for an avetage of 75 cents per unit and will cost teguh an average of 25 cents per unit: 4. Owmers of the bulldings in which the machimes ate located are paid a commission of 5 cents per unit of candy and soft ifrinks sold. 5. One person will be hired to service the machines. The salary will be $1,500 per month. 6 . Other expenses are estimated at $600 per month. These expensos do not vary with the number of units sold: Required: a. Determine the unit contribution matgin and the break even volume in units and in dollars pes month. (Do not round intermediate calculetions. Round "Unit contribution margin" to 2 decimal pleces.) c. What sales volume in units and in dollars per inonth will be necessary to produce an operating income equal to a 30 percert annual retum on Tegut's $45,000 investment? (Do not round intermediate calculations.) d. Teguh is consideting offering the building owners a that rental of $30 per machine per month in lieu of the comanission of 5 cents per unit sold. What effect would this change in commisson arrangerneat have on his monthly breok-even volume in terms of unils? (Do not round intermediote colculotions.) Required: a. Determine the unit contribution margin and the break-even volume in units and in dollars per month. (Do not round intermediate calculations. Round "Unit contribution morgin" to 2 decimal places.) c. What sales volume in units and in dollats per month will be necessary to produce an operating income equal to a 30 percent aninual tefurn on Teguh's $45,000 investment? (Do not round intermediate calculations.) d. Teguh is considering offering the building owners a flat rentat of $30 per machine per month in lieu of the commission of 5 cents pei unit sold. What effect would this change in cormission arrangement have on his monthly break-even volume in terms of units? (Do not round intermediate calculations.)
