The machines have a service life of five years and no

Reference no: EM13578133

Simon Teguh is considering investing in a vending machine operation involving 20 vending machines located in various plants around the city. The machine manufacturer reports that similar vending machine routes have produced a sales volume ranging from 800 to 1,000 units per machine per month. The following information is made available to Teguh in evaluating the possible profitability of the operation.

1.An investment of $45,000 will be required, $9,000 for merchandise and $36,000 for the 20 machines.

2.The machines have a service life of five years and no salvage value at the end of that period. Depreciation will be computed on the straight-line basis.

3.The merchandise retails for an average of 75 cents per unit and will cost Teguh an average of 25 cents per unit.

4.Owners of the buildings in which the machines are located are paid a commission of 5 cents per unit of candy and soft drinks sold.

5.One person will be hired to service the machines. The salary will be $1,500 per month.

6.Other expenses are estimated at $600 per month. These expenses do not vary with the number of units sold.

a.Determine the unit contribution margin and the break-even volume in units and in dollars per month. (Do not round intermediate calculations and round your contribution margin answer to 2 decimal places. Omit the "tiny_mce_markerquot; sign in your response.)

Reference no: EM13578133

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