• 100% Satisfaction Guarantee

Steven, M.Acc., Instructor
Satisfied Customers: 744
Experience:  Instructor and accountant. Master's degree in Accounting.
24317596
Steven, M.Acc. is online now

# 1. The marvel mfg. company is considering whether or not to

### Resolved Question:

1. The marvel mfg. company is considering whether or not to construct a new robotic production facility. The cost of this new facility is \$618,000 and it is expected to have a six-year life with annual depreciation expense of \$103,000 and no salvage value. Annual sales from the new facility are expected to be 1,960 units with a price of \$1,010 per unit. Variably production costs are \$610 per unit, while fixed cash expenses are \$78,000 per year.
A. Find the accounting and the cash break-even units of production
B. Will the plane make a profit based on its current expected level of operations?
C. Will the plant contribute cash flow to the firm at the expected level of operations?
Submitted: 3 years ago.
Expert:  Steven, M.Acc. replied 3 years ago.
Hello,

(A) Accounting break-even point:

Q = Total fixed costs / Contribution margin per unit
Q = (\$78,000 + 103,000) / (\$1,010 – 610)
Q = 452.5 units.

Cash break-even point:

Q = Cash fixed costs / Contribution margin per unit
Q = \$78,000 / (\$1,010 – 610)
Q = 195 units.

(B) Yes, the plant will make a profit based on its current expected level of operations:

Excess units produced over break-even = 1,960 – 452.5 = 1,507.5
Contribution margin per unit = \$1,010 – 610 = \$400
Net profit = \$400 × 1,507.5 = \$603,000.

To check:

Gross profit = Sales – COGS = \$1,979,600 – 1,195,600 = \$784,000
Overhead = \$103,000 + 78,000 = \$181,000.
Net profit = Gross profit – Overhead = \$784,000 – 181,000 = \$603,000.

(C) Yes, the plant will contribute cash flow to the firm at the expected level of operations:

Excess units produced over break-even = 1,960 – 195 = 1,765
Contribution margin per unit = \$1,010 – 610 = \$400
Net profit = \$400 × 1,765 = \$706,000.

To check:

Gross profit = Sales – COGS = \$1,979,600 – 1,195,600 = \$784,000
Net profit = Gross profit – Cash overhead = \$784,000 – 78,000 = \$706,000.
Steven, M.Acc., Instructor
Satisfied Customers: 744
Experience: Instructor and accountant. Master's degree in Accounting.

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

### What Customers are Saying:

• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
< Previous | Next >
• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
• This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
• Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
• I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin Kernersville, NC
• Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther Woodstock, NY
• Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. Robin Elkton, Maryland
• He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here. Diane Dallas, TX

• ### linda_us

#### Satisfied Customers:

847
A tutor for Business, Finance, Accounts and other related topics.
< Last | Next >

### linda_us

#### Satisfied Customers:

847
A tutor for Business, Finance, Accounts and other related topics.

### F. Naz

#### Satisfied Customers:

443
Have completed B.COM and CA Finalist

### Bizhelp

#### Satisfied Customers:

260
BA degree and Certified Public Accountant

### Mr. Gregory White

#### Satisfied Customers:

201
M.A., M.S. Education / Educational Administration

144

30

19