Determine the most prudent investment

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Reference no: EM13789799

1. A startup landscaping company has to determine the most prudent investment in new trucks and mowers. They narrow their choice to two sets. Which set will be better given that money is worth 7.25%?

Capital Required---------Set I---------Set II

Initial cost ($)-----------68,000---------65,000

Life span (years)---------12------------11

Maintenance ($)---------5,000---------4,500

Residual value ($)---------7,000---------6,000

2. Steve is opening a small wood shop to build custom mailboxes. He has the following costs:

Fixed cost: $3,000 a month

Wages for two assistants who work 40 hours a week,

40 weeks a year earning $12 an hour

Material: $10 per box

Handling: $1.00 per box

If he sells his boxes at $30 each, calculate the shop's:

(a) Contribution margin

(b) Break-even quantity

(d) Break-even quantity and revenue if he wants to make $5,000 in profit

Also draw the break-even graph.

Reference no: EM13789799

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