Microsurfacing is part of a pavement restoration and maintenance program that seals the surface of a street that has minor cracking to prevent water from penetrating into the base material. The annual cost of the equipment (truck, tank, valves, etc.) is $109,000 per year and the material cost is $2.75 per square yard. Alternatively, regular street resurfacing requires equipment that has a first cost of $225,000 with a 15-year life and no salvage value. The variable cost for regular resurfacing is $13 per square yard. At an interest rate of 8% per year, how many square yards per year must be resurfaced for the two methods to break even?
What will be an ideal response?
Let x = square yards per year to breakeven
-109,000 – 2.75x = -225,000(A/P,8%,15) – 13x
-109,000 – 2.75x = -225,000(0.11683) – 13x
10.25x = 82,713
x = 8070 square yards/year
You might also like to view...
Which of the following diseases is NOT a major threat to the animal agriculture industry?
a. foot and mouth disease c. anemia b. avian influenza d. porcine reproductive and respiratory syndrome
Which of the following leads to a total cost of $100?
A. cost/unit = $30, quantity = 3, fixed cost = $15 B. cost/unit = $15, quantity = 6, fixed cost = $10 C. cost/unit = $20, quantity = 5, fixed cost = $5 D. cost/unit = $20, quantity = 4, fixed cost = $10
A heating system includes all of the following parts except a ___.
A. heater core B. ventilation system C. receiver/dryer D. Distribution plenum
A brake warning lamp on the dash remains on whenever the ignition is on. Technician A says that there could be a fault in the brake hydraulic system. Technician B says the problem could be due to a stuck parking brake cable switch. Who is right?
A) Technician A only B) Technician B only C) Both technicians A and B D) Neither technician A nor B