A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characte

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A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplier A costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplier A (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5
Question 4 Part A: Choose the correct Before Tax Cash Flow Diagram for this scenario from the following choices.
Option A 4,000 Option Supplier A +4,000 Supplier A Option Co 4,000 Supplier A Option DO +4,000 AN 1,400 in 12% 1.400 1,400+4 1=12% 1,400 +4 1= 32% In 12% 800 800 20 3,000 Supplier B 3,000 Supplier B 3,000 Supplier B 3,000 3N-1.25N 1,100 in 12% 3N-1.25N 1-12% 1,100+3N-1.25 1-12% 1,300-3-1.25N 1-12% 700 700 700 7:00 20 20
Question 4 Part B: Identify the correct Function Notation of AW for supplier A. O 4,000 (A/P, 12%, 5) - 1,400 (A/P, 12 %, 5) + 800 (A/F, 12 %, 5) +4.00 O 4,000 (A/P, 12%, 20 ) - 1,400 + 800 (A/F, 12%, 20)+4.00N O 4,000 (A/P, 12%, 5) - 1,400 + 800 (A/F, 12%, 5) -4.00N O4,000 (A/P, 12%, 5) -1,400 + 800 (A/F, 12%, 5) +4.00N
Question 4 Part C: Identify the correct Function Notation of AW for supplier B. O-3,000 (A/P, 12%, 4) - 1,100 + 700 (A/F, 12%, 4)-1.75N O 3,000 (A/P, 12%, 20)-1,100+ 700 (A/F, 12%, 20)+1.75N O-3,000 (A/P, 12%, 4)-1,100(A/P, 12%, 5) + 700 (A/F, 12%, 4)+1.75N O-3,000 (A/P, 12%, 4) - 1,100+700 (A/F, 12%, 4)+1.75N
Question 4 Part D: From the equations identified in Parts b and c, select the correct equation of the number of units the company should sell each year to breakeven ON-2383.71-1941.24 O4N-2383.71= 1.75+ 1941.24 O4N-2383.71 = 1.75N - 1941.24 4N-2383.71=2.75-1941.24
Question 4 Part E: How many units per year must the company sell in order to justify using supplier A? Enter your answer in the form: 12345.67
Question 4 Part F: Provide a statement to your answer to Part E. O Both A & B B: The company needs the minimum amount found in part "E" per year to break-even OC: The company needs the maximum amount found in part "E" per year to break-even OA: The company needs the exact amount found in part "E" per year to break-even