Question: Question #4 A production manager has obtained the following estimates of costs/revenues for magnatrons. Their plan is to produce these magnatrons for 5 years. Yearly

Question #4

A production manager has obtained the following estimates of costs/revenues for magnatrons. Their plan is to produce these magnatrons for 5 years.

Yearly sales = 1,000 units/year

Sales Price = $50/unit

Variable Cost = $5.25/unit

Initial Investment = $50,000

(5) How many units does the company need to produce/sell to breakeven?

(2) Does the company break even during year 1?

(3) Suppose the company can reduce the Variable Costs by $1.00 per unit if they invested in the "latest technology" for $60,000 (vice $50,000). Based upon the potential profitability over the 5 year period only, should the company invest in the latest technology?

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