The Marvel MFG. Company is considering whether or not to constuct 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 savage value. Annual sales from the new facility are expected to be 2,000 units with a price of 1000 per unit. Variable production costs are 600 per unit, and fixed cash expenses are 80,000 per year.
Find the accounting and the cash break even units of production.
Will the plant make a profit based on its current expected level of operations?
Will the plant contribute cash flow to the firm at the expected level of operations?