ABC Ltd. expects the cost of a machine to produce a specific part to be Rs. 40,00,000. After 5-year useful life, the machine is expected to have a salvage value of Rs.8,00,000. The annual maintenance costs are believed to be Rs. 14,00,000. How many parts must the company sell per year to break even at 12% annual interest rate, if the variable cost of producing the part is Rs. 150 per unit and if the part can be sold for Rs. 400 per unit? What will be the breakeven sales, if the selling price of the part is reduced to Rs. 300 per unit to counter act with the competitor?
ABC Ltd. expects the cost of a machine to produce a specific part to be Rs. 40,00,000. After 5-year useful life, the machine is expected to have a salvage value of Rs.8,00,000. The annual maintenance costs are believed to be Rs. 14,00,000. How many parts must the company sell per year to break even at 12% annual interest rate, if the variable cost of producing the part is Rs. 150 per unit and if the part can be sold for Rs. 400 per unit? What will be the breakeven sales, if the selling price of the part is reduced to Rs. 300 per unit to counter act with the competitor?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Ltd. expects the cost of a machine to produce a specific part to be Rs. 40,00,000. After 5-year useful life, the machine is expected to have a salvage value of Rs.8,00,000. The annual maintenance costs are believed to be Rs. 14,00,000. How many parts must the company sell per year to break even at 12% annual interest rate, if the variable cost of producing the part is Rs. 150 per unit and if the part can be sold for Rs. 400 per unit? What will be the breakeven sales, if the selling price of the part is reduced to Rs. 300 per unit to counter act with the competitor?
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