A company is trying to decide which of two new product lines to introduce in the coming year. The predicted revenue and cost data for each product line follows: 
The company has a 30% tax rate, it uses the straight-line depreciation method, and it predicts that cash flows will be spread evenly throughout each year. Calculate each product's payback period. If the company requires a payback period of three years or less, which, if either, product should be chosen?
Definitions:
Average Variable Cost
The total variable cost divided by the total output, representing the variable cost per unit of output.
Average Total Cost
The total cost per unit produced, determined by dividing the sum of fixed and variable costs by the quantity of output.
Shut Down
The process of ceasing operations or activities, often temporarily, in a business or other organization.
AVC
Average variable cost refers to the total variable cost per unit of output, calculated by dividing the total variable costs by the amount of output produced.
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