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 $630000 and it is
expected to have a six-year life with annual depreciation expense of $105000 and now salvage value. Annual sales from the new facility are expected to be
1950 units with a price of $1000 per unit. Variable production costs are $560 per unit and while fixed cash expenses are $79000 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?