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    CVP Analysis

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    Paul Scott has a 2008 Cadillac that he wants to update with a geo-tracker device so he will have access to road maps and directions. After-market equipment can be fitted for a flat fee of $500, and the service provider requires monthly charges of $20. In his line of work as a traveling salesman, he estimates that this devise can save him time and money - about $35 per month (as the price of gas keeps increasing).

    In order to determine the financial feasibility of purchasing the geo-tracker, Paul wants to determine the number of months it will take to break even. He plans to keep the car for another 3 years.

    a. Calculate the break even point for the device in months.
    b. Based on a, should Paul have the tracker installed in his car?

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    Solution Preview

    a. Calculate the break even point for the device in months.
    Monthly savings=P=$35 per ...

    Solution Summary

    Solution describes the steps to calculate break even point in the given case.