Should I Buy New Equipment Now? Essay

731 Words Mar 24th, 2013 3 Pages
Get started on the assignment by watching the Should I Buy New Equipment Now? video on the link below then answer the following questions. http://media.pearsoncmg.com/ph/esm/chet_cleaves_cbsm9e_12/tools/RealWorldCase_before.htm The engraving department uses an aging rotary engraver to engrave plaques and trophies. The machine has been reliable, but requires regular maintenance and periodic replacement of parts. Charlie has just found out that this engraver will no longer be supported by the manufacturer. This means that service and parts will be hard to get in the future and if it breaks it could take up to three weeks to get a new machine up and running. They keep this machine running almost 8 hours a day, every day. Each day that the …show more content…
Calculate the total amount of revenue (gross profit) that will be lost if the engraver breaks.
$975 x 18 days = $17,550 3. If the engraving business makes $975 per day in revenue and generates a net profit of 25%, how much profit is generated per day?
$975 x 25% = $243.75
$975 + $243.75 = $1,218.75 4. What is the total net profit lost if the engraver is out of commission for the full 18 days?
$1,218.75 x 18 days = $21937.50 5. If the engraver is kept busy 269 full days per year, how much revenue (gross profit) will be generated?
Revenue = (269 days x $975) – $28,000
Revenue = $262,275 - $28,000
Revenue = $234,275

6. If the engraver is kept busy 269 full days per year, how much net profit will be generated?
Net Profit = ($1,218.75 x 269) – $234,275
Net Profit = $327,843.75 - $234,275
Net Profit = $93,568.75 7. Given a 25% profit margin and $975 per day in revenue, how many days would it take for the new engraver to earn back the total cost of purchase, if the entire net profit were allocated to pay for the unit? Round your answer to the next full day.
$28,000 / $1,218.75 = 22.9
23 days 8. What other factors should Charlie consider in order to make a good business decision?
Charlie should consider selling his old engraver to someone that may have use for it and use the money to put towards the new engraver, resulting in a smaller loan and less to pay back. 9. Should Charlie

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