The cost of machinery for a project is 400000 Expected life

The cost of machinery for a project is $400,000. Expected life of the equipment is 4 years with a 10% salvage. direct labor is $30 per hour. The production rate is 15 parts per hour. Direct material is $12.37 per unit. The parts sell for $22.00 each. Straight line depreciation will be used, and the tax rate is 36%. The company wants to earn an annual nominal rate of 12% (1% per month) on its money. Assuming monthly compunding, how many parts need to be made each month to break even? (Use AEC Equation)

USE AEC (ANNUAL EQUIVALENT) EQUATION

Solution

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