Answer:
Alternative A : 7,800 units
Alternative B: 5,250 units
Explanation:
Were:
for A:
15 - 10 = 5 contrbution margin
each unit contributes 5 dollars
then: $39,000 fixed cost / $5 per unit = 7,800 units
It need to sale 7,800 untis to pay the fixed cost generated for alternative A
for B:
15 - 11 = 4 contribution margin
each unit contributes 4 dollars
then: $21,000 fixed cost / $4 per unit = 5,250
It need to sale 5,250 units to pay the fixed cost for this alternative
Points are an upfront charge by the lender that is part of the price of a mortgage. Points are expressed as a percent of the loan amount, with 2 points being 2%. On a $400,000 loan,
solutions
Loan Amount $400,000
Loan Term (in months) 360 months
mortgage I mortgage II
Interest Rate 6.000% 5.750%
Points 0.00% 2.00%
Loan Payment Amount $2,398.20 $2,334.29
Costs Over 30 — Year Period
Points Paid in Cash
$0 $8,000
Monthly Costs -
Principal and Interest $863,348 $840,340
Lost Interest
On Points $0 $0
On Monthly Costs $0 $0
Total Costs $863,348 $848,340
Reduction in Loan Balance $400,000 $400,000
Total Cost Offsets $400,000 $400,000
Cost Net of Offsets $463,348 $448,340
Conclusions - Based on a 30 Year Holding Period
Over the next 30 years the High Interest / Low Points Loan Will Save You: $15,008
In Months, the Break-even Point Occurs in 1 months
In Years, the Break-even Point Occurs in 0.0833 years