Task: Spread sheet problem.
The following are the expected revenue and costs from developing two different computer products over a five year period. At the end of five years, each system will have to be replaced. The salvage value for each is the same at $50,000. The fixed costs over the five year period for system 1 is $1,000,000 per year, and for system 2, it's $1,500,000 per year. The variable costs per unit for system 1 is $350 per unit, and for system 2, it's $150 per unit. The selling price for each unit of production is $500. What are the Break even points for both selling price for each unit of production is $500. What are the break even points for both systems? How many units would each have to produce and sell in a year to make a profit for each year of $500,000? Which system would you choose and why after you completed your analysis, the sales manager added one more bit of information. She indicated that it is easy to make a profit that average $500,00 using either system. However, she felt there might be an opportunity to sell an additional 1000 units in either system. How does this change your analysis?