A production plant is considering the purchase of some automated equipment to perform a task currently done manually. Currently, two supervisors (at an annual cost of $40,000 each paid at the end of each year) are required to supervise the employees. In addition, it is estimated that it takes $15 of labour to produce one unit.
The new equipment costs $185,000 to purchase, and will have annual operating and maintenance costs of $10,000. In addition, the cost per unit produced will be $3. The equipment will last 5 years and will have an anticipated salvage value of $5,000. If the new equipment is purchased, the company would only need one supervisor.
Given an MARR of 10%, what production level (#units produced/year) would justify the equipment purchase?