Assignment 4

Assignment 4

This assignment has two parts:

Part one:

Boston General Hospital is considering investing $98,000 in a new dietary equipment to replace its present equipment, which is

completely depreciated and outdated. An alternative to this investment is a long-term contract with a local firm to perform the hospital’s

dietary service. It is expected that the hospital would save $20,000 per year in operating costs if the dietary service was performed

internally, vs. contracting it out. Both the expected life and the depreciable life of the projected equipment are 6 years. Salvage value of

the present equipment is expected to be zero. Assuming that Boston General Hospital can borrow and invest money at 8%, 

calculate the payback period. Please show your work for this calculation and label it properly to receive credit.

Part two:

Please complete question 1-5 below.  Please show all of your work to receive credit and label it properly.

Breakeven Analysis:

Jack’s respiratory care agency is considering a new product with a fixed cost of $3,000, a charge per unit of $150, and a variable cost of $100.

1. Calculate the break-even point in quantity.

2. Calculate the contribution margin in dollars.

3. Calculate the contribution margin as a percent.

4. Calculate the breakeven point in dollars.

5. The breakeven point occurs where:

A. total variable costs and total revenue intersect
B. total revenue outpaces total avoidable fixed costs
C. total costs and total revenue intersect
D. total fixed costs and total revenue intersect
E. total profit margin and total costs intersect
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