Field painting on steel structures is performed as necessary by Vaksun International Construction. Over the last several years the equivalent annual cost at 8% per year has been $28,000. A subcontractor will perform all field painting for an initial fee of $100,000 for a 5-year contract and an add- on rate of $5.00 per 100 sq ft per coat (layer).
a. Determine the breakeven square footage using the contract period of 5 years.
b. Past yearly records indicate the total areas covered, including multiple coats if necessary. Determine the years in which the contract would have been an economic advantage for Vaksun.
Year 2003 2004 2005 2006 2007 100sq
ft 420 852 1004 339 571