The Break Even Point Is To Be Determined For Two Production Methods One Manual And The Other Automated, The Manual Method Requires Two Workers At $16.50/Hr Each. Together ,Their Production Rate Is 30 Units Per Hour. The Automated Method Has An Initial Cost Of $125,000, At 4 Year Service Life, No Salvage Value And Annual Maintainance Cost =$3,000.No Labor (Except For Mainteinance)Is Required For The Machine, But The Power To Operate It Is 50 Kw(When Running).

Oakmont company has an opportunity to manufacture and sell a new product for a four-year period. the company’s discount rate is 18%. after careful study, oakmont estimated the following costs and revenues for the new product: cost of equipment needed $ 230,000 working capital needed $ 84,000 overhaul of the equipment in year two $ 9,000 salvage value of the equipment in four years $ 12,000 annual revenues and costs: sales revenues $ 400,000 variable expenses $ 195,000 fixed out-of-pocket operating costs $ 85,000 when the project concludes in four years the working capital will be released for investment elsewhere within the company. click here to view exhibit 12b-1 and exhibit 12b-2, to determine the appropriate discount factor(s) using tables.