Determine and calculate the break even poin

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Reference no: EM132476896

Point 1: After a closer examination of capacity, management believes an additional rig is required to service the FHP account. Assume Over-land's management chooses to invest in one additional truck and trailer that can serve the needs of FHP (at least initially). Assume the annual incremental fixed costs associated with acquiring the additional equipment is $50,000. Further, FHP would agree to pay $2.20 per mile (total including FSC and miscellaneous) if Over-land would sign a five-year contract. What is the annual number of miles required for Over-land to break even, assuming the company adds one truck and trailer? What is the expected annual increase in profitability from the FHP contract? (Use 52 weeks per year in your calculations.)

Question 1: In this case, in order to calculate the break even point. Should not we include the existing fix cost? should not the fix cost be added (old and increment) and teh divided by all the units to get the new fix cost per mile?

Reference no: EM132476896

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