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The F&M Beverage Company recently installed a new bottling machine. The machine's initial cost is RM2,000, and ean be depreciated on a straight line basis
The F\&M Beverage Company recently installed a new bottling machine. The machine's initial cost is RM2,000, and ean be depreciated on a straight line basis to a zero salvage in 5 years. The machine's fixed cost per year is RM1,800, and its variable cost is RM0.50 per unit. The selling price per unit is RM1.50. F\&M's tax rate is 34%, and it uses a 16% discount rate. i) Calculate the accounting break-even point on the new machine, as well as the present value break-even point on the new machine. (3 marks) ii) Why should you use breakeven analysis in the context of NPV rather than earnings? (1 marks)
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