Problem:
The marvel mfg company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $600,000 and it is expected to have a six year life with annual depreciation expense of $100,000 and no salvage value. Annual sales from the new facility are expected to be 2,000 units with a price of $1,000 per unit. Variable production costs are $600 per unit, the fixed cash expenses are $80,000 per year.
Required:
Question 1: Find the accounting and the cash break-even units of production.
Question 2: Will the plant make a profit based on its current expected level of operations?
Question 3: Will the plant contribute cash flow of the firm at the expected level of operations?
Note: Explain all steps comprehensively.