A gas refinery is offered new add-on equipment for cleaning the smoke stack. The leasing cost of the equipment is $\$ 200,000$ per year. The addition reduces the variable cost by $\$ 0.02$ per gallon of gas. The selling price of gas is $\$ 2.00$ per gallon; other variable costs are $\$ 1.10$ per gallon.
(A) What is the minimum volume of production per year that will justify the lease of the equipment? (B) If the expected volumes for the next 3 years are: 8,000,000, 14,000,000 and 20,000,000, will it be worth leasing the equipment for three years? (Assuming that it has to be leased for all three years or not leased at all)

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The Answer of A gas refinery is offered new add-on equipment for cleaning the smoke stack. The leasing cost of the equipment is $\$ 200,000$ per year. The addition reduces the variable cost by $\$ 0.02$ per gallon of gas. The selling price of gas is $\$ 2.00$ per gallon; other variable costs are $\$ 1.10$ per gallon.
(A) What is the minimum volume of production per year that will justify the lease of the equipment? (B) If the expected volumes for the next 3 years are: 8,000,000, 14,000,000 and 20,000,000, will it be worth leasing the equipment for three years? (Assuming that it has to be leased for all three years or not leased at all)

A Gas Refinery Is Offered New Add-On Equipment for Cleaning $200,000\$ 200,000$200,000

A Gas Refinery Is Offered New Add-On Equipment for Cleaning $\$ 200,000$