Answer:
It will take 2 years and 292 days to break even.
Explanation:
Giving the following information:
It costs $1,000 for hand tools and $1.50 labor per unit to manufacture a product. Another alternative is to manufacture the product by an automated process that costs $15,000, with a $0.50 per-unit cost.
Annual production= 5,000
We need to find the point where the automated process equals the "old" process.
Old process:
Total cost= 1,000 + 1.5*x
x= number of units
New process:
Total cost= 15,000*0.5*x
We need to determine the number of units:
1,000 + 1.5x = 15,000 + 0.5x
x=14,000/1= 14,000 units
Therefore:
14,000/5,000= 2.8 years
.8*365= 292 days
It will take 2 years and 292 days to break even.
