Calculate the break-even point, in number of unit sold, for the following manufacturing company, ABC Inc using this income statement data:

Sales Revenue $540,000 $180 price per unit, 3000 units sold

Variable Costs 189,000 $63 variable cost per unit

Contribution Margin 351,000

Fixed Costs         130,000

Profit         221,000

QUESTION II

Imagine that you own a retail sports equipment store.  You have hired 10 employees:  six floor salespersons, one store manager, one evening and weekend store manager and two administrative staff.   You would like to begin employee evaluations once annually, and decide to create performance indicators to fairly measure the contributions and success of each employee group.  The employee groups are:  salespersons, manager and administrative support.  Duties of the administrative staff include store bookkeeping and ordering inventory.

Suggest two performance indicators for each of the organizational units listed below. Decide how your employees will be evaluated, objectively (that is, not ‘subjectively).  You may refer to page 301 Table 7.9 for examples, but try to think of your own performance indicators for the three groups of employees.

QUESTION III

A. Determine the payback period, in years, of a project that is expected to generate $30,000 per year in cash flow.  The project cost (initial investment) is $250,000.

B. Name three other methods (excluding payback period, from Part A) used by financial managers, to assess the viability of a multi-year project, with significant initial investment (similar to the example in part A). Briefly describe each method, in one short sentence per method. Refer to pages 477 to 489 of Chapter 11, Capital Budgeting. You do not need to do calculations.  Do your best to explain in your own words, each capital budgeting method.