What is the breakeven cost-annual fixed cost

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Reference no: EM13771047

Micro surfacing is part of a pavement restoration and maintenance program that seals the surface of a street that has minor cracking to prevent water from penetrating into the base material. The annual cost of the equipment (truck, tank, valves, etc.) is $97,000 per year and the material cost is $2.64 per square yard. Alternatively, regular street resurfacing requires equipment that has a first cost of $202,000 with a 11-year life and no salvage value. The variable cost for regular resurfacing is $15.16 per square yard. At an interest rate of 6% per year,

(a) What is the annual fixed cost of the second alternative?

(b) How many square yards per year must be resurfaced for the two methods to break even?

______ sq. yds.

Reference no: EM13771047

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