Initial cash outlay is $150,000, no residual value. Sales price is expected to be $2,250 per unit, with $595 per unit in labor expense and $795 per unit in materials. Direct fixed costs are estimated to run $20,750 per month. Cost of capital is 8%, and the required rate of return is 10%. They will incur all operational costs in year 1, though sales are expected to be 55% of break-even. Break-even (considering only direct fixed costs) is expected to occur in year 2. Variable costs will increase 2% each year, starting in year 3. Sales are estimated to grow by 10%, 15%, and 20% for years 3 - 5. They have asked you to calculate: the product’s contribution margin break-even quantity
