Pharoah Inc. produces modern light fixtures that sell for $160 per unit. The firm's management is considering purchasing a high- capacity manufacturing machine. If the high-capacity machine is purchased, then the firm's annual cash fixed costs will be $71,000 per year, variable costs will be $80 per unit, and annual depreciation and amortization expenses will equal $20,000. If the machine is not purchased, annual cash fixed costs will be $15,000, variable costs will be $130 per unit, and annual depreciation and amortization expenses will equal $11,000. What is the minimum level of unit sales necessary in order for EBIT with the high-capacity machine to be higher than EBIT without that machine? Minimum level of sales required units

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Pharoah Inc. produces modern light fixtures that sell for $160 per unit. The firm's management is considering purchasing a high-
capacity manufacturing machine. If the high-capacity machine is purchased, then the firm's annual cash fixed costs will be $71,000 per
year, variable costs will be $80 per unit, and annual depreciation and amortization expenses will equal $20,000. If the machine is not
purchased, annual cash fixed costs will be $15,000, variable costs will be $130 per unit, and annual depreciation and amortization
expenses will equal $11,000.
What is the minimum level of unit sales necessary in order for EBIT with the high-capacity machine to be higher than EBIT without
that machine?
Minimum level of sales required
units
Transcribed Image Text:Pharoah Inc. produces modern light fixtures that sell for $160 per unit. The firm's management is considering purchasing a high- capacity manufacturing machine. If the high-capacity machine is purchased, then the firm's annual cash fixed costs will be $71,000 per year, variable costs will be $80 per unit, and annual depreciation and amortization expenses will equal $20,000. If the machine is not purchased, annual cash fixed costs will be $15,000, variable costs will be $130 per unit, and annual depreciation and amortization expenses will equal $11,000. What is the minimum level of unit sales necessary in order for EBIT with the high-capacity machine to be higher than EBIT without that machine? Minimum level of sales required units
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