1. A startup landscaping company has to determine the most prudent investment in new trucks and mowers. They narrow their choice to two sets. Which set will be better given that money is worth 7.25%?
Capital Required---------Set I---------Set II
Initial cost ($)-----------68,000---------65,000
Life span (years)---------12------------11
Maintenance ($)---------5,000---------4,500
Residual value ($)---------7,000---------6,000
2. Steve is opening a small wood shop to build custom mailboxes. He has the following costs:
Fixed cost: $3,000 a month
Wages for two assistants who work 40 hours a week,
40 weeks a year earning $12 an hour
Material: $10 per box
Handling: $1.00 per box
If he sells his boxes at $30 each, calculate the shop's:
(a) Contribution margin
(b) Break-even quantity
(c) Break-even revenue
(d) Break-even quantity and revenue if he wants to make $5,000 in profit
Also draw the break-even graph.