International Paper Company has asked for your help in comparing its present computer system with a proposed
Question:
International Paper Company has asked for your help in comparing its present computer system with a proposed (new) system its board of directors would like to see implemented. Proposed system and present system costs as well as benefits of the proposed system are given below:
Year Proposed System Costs Present System Costs
Year 1
Equipment Lease $22,000 $11,500
Salaries 33,000 50,000
Overhead 4,400 3,000
Development 33,000 —
Year 2
Equipment Lease $22,000 $10,500
Salaries 36,300 55,000
Overhead 4,840 3,300
Development 13,200 —
Year 3
Equipment Lease $22,000 $10,500
Salaries 39,600 60,000
Overhead 5,390 3,600
Development — —
Year 4
Equipment Lease $22,000 $10,500
Salaries 42,900 66,000
Overhead 6,050 4,000
Development — —
Benefits of the proposed system for International Paper Company are:
Year Benefits
1 $60,500
2 82,500
3 88,000
4 93,500
Now you do:
(a). Draw the graph for Break-Even analysis and indicate the break-even point on the graph. Determine the year in which Interglobal Paper Company will break even.
(b) Draw the graph for payback analysis. Determine the year in which payback period begins.
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,