White-N-Wheat Bread Company has asked for your help in comparing its present computer system with a new one its board of directors would like to see

White-N-Wheat Bread Company has asked for your help in comparing its present computer system with a new one its board of directors would like to see implemented. Proposed system and present system costs are as follows:

     Year                      Proposed System Costs                      Present System Costs

     Year 1

Equipment Lease        $20,000                                 $21,500

Salaries                        40,000                                   50,000

Overhead                        4,000                                   13,000

Development                 30,000                                       —

    Year 2        

Equipment Lease        $20,000                                 $10,500

Salaries                        43,000                                   55,000

Overhead                        7,000                                     3,300

Development                 12,000                                       —

    Year 3

Equipment Lease        $20,000                                 $10,500

Salaries                        36,000                                   60,000

Overhead                        4,900                                     3,600

Development                     —                                           —

    Year 4

Equipment Lease        $20,000                                 $10,500

Salaries                        39,000                                   66,000

Overhead                        5,500                                     4,000

Development                    —                                            —

a. Using break-even analysis, determine the year in which White-N-Wheat Bread will break even with these two strategies.

b. Graph the costs and show the break-even point.

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