Question

We are evaluating a project that costs $660,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 69,000 units per year. Price per unit is $58, variable cost per unit is $38, and fixed costs are $660,000 per year. The tax rate is 35 percent, and we require a return of 12 percent on this project. a. Calculate the accounting break-even poin

Answer 1

39600

Step-by-step explanation:

Breakeven quantity are the number of units produced and sold at which net income is zero

Breakeven quantity = fixed cost / price – variable cost per unit

Fixed cost = cost of machine + depreciation expense

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

$660,000 / 5 = $132,000

total fixed cost $660,000 + $132,000 = $792,000

$792,000 / ($58 - $38) = 39,600