Need solution will rate 2 3 4 Carson Company is investing in

Carson Company is investing in a new machine that costs $200,000. The new machine will generate cash flows of $150,000 for each of the next three years. Carson uses a discount rate of 10%, what is the payback (in years)? Select one: o b. 1.25 O c. 1.33 o d. 2

Solution

1. payback period : is a period in which we get our initial investment back/recover.

we simply divide our initial investent cost with our per year cash flow

=200000/150000

=1.33

2. our per unit cost of finished product = 1.50

but here we have completed only 50% so cost will be = 1.50* 0.50 = 0.75

our total cost = 31500

so the no. of product we have made = 31500/0.75

=42000

3. in absorbtion costing we include both fixed as well as variable cost

but in variable costing we include only variable portion of cost

hence ending inventory cost will be lesser in variable costing

4. Breakeven is a point where our fixed cost is equal to contribution

contribution = sale price - variable cost

let the no. of unit sold of A = x

as per the information given in question ,so no. of units sold of B must be 3X

contibution of A = 20 - 14 = 6

B = 30 -20 = 10

equation be

(6 * X ) + (10*3X) = 360000
6X + 30X = 360000
36X=360000
x=360000/36 = 10000

answer is b