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The following are the expected revenue and costs from developing two different computer products over a five year period. At the end of five years, each system will have to be replaced. The salvage value for each is the same at \$50,000. The fixed costs over the five year period for system 1 is \$1,000,000 per year, and for system 2, it's \$1,500,000 per year. The variable costs per unit for system 1 is \$350 per unit, and for system 2, it's \$150 per unit. The selling price for each unit of production is \$500. What are the Break even points for both selling price for each unit of production is \$500. What are the break even points for both systems? How many units would each have to produce and sell in a year to make a profit for each year of \$500,000? Which system would you choose and why after you completed your analysis, the sales manager added one more bit of information. She indicated that it is easy to make a profit that average \$500,00 using either system. However, she felt there might be an opportunity to sell an additional 1000 units in either system. How does this change your analysis?

#### Solution Preview

The following are the expected revenue and costs from developing two different computer products over a five year period.

At the end of five years, each system will have to be replaced. The salvage value for each is the same at \$50,000.

The fixed ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer how does this change your analysis.

\$2.19