Interglobal Paper Company has asked for your help in comparing its present computer system with a new one its board of directors would like to see implemented. The proposed system costs and present system costs are as follows:

a. Using break-even analysis, determine the year in which Interglobal Paper will break even.

b. Graph the costs and show the break-even point.

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Item Year 1 Proposed System Costs Present System Costs Equipment lease $20,000 Salaries 30,000 $11,500 50,000 Overhead 4,000 3,000 Development 30,000 Year 2 Equipment lease $20,000 $10,500 Salaries 33,000 55,000 Overhead 4,400 3,300 Development 12,000 Year 3 Equipment lease $20,000 $10,500 Salaries 36,000 60,000 Overhead 4,900 3,600 Development Year 4 Equipment lease $20,000 $10,500 Salaries 39,000 66,000 Overhead 5,500 4,000 Development