It costs $1,000 for hand tools and $1.50 labor per unit to manufacture a product. Another alternative is to manufacture the product by an automated process that costs $15,000, with a $0.50 per-unit cost. With an annual production rate of 5,000 units, how long will it take to reach the break-even point of using the automated equipment

It will take 2 years and 292 days to break even.

Explanation:

Giving the following information:

It costs $1,000 for hand tools and $1.50 labor per unit to manufacture a product. Another alternative is to manufacture the product by an automated process that costs $15,000, with a $0.50 per-unit cost.

Annual production= 5,000

We need to find the point where the automated process equals the "old" process.

Old process:

Total cost= 1,000 + 1.5*x

x= number of units

New process:

Total cost= 15,000*0.5*x

We need to determine the number of units:

1,000 + 1.5x = 15,000 + 0.5x

x=14,000/1= 14,000 units

Therefore:

14,000/5,000= 2.8 years

.8*365= 292 days

It will take 2 years and 292 days to break even.

answer; common market;