Question

Mosler Company has compiled this information for a new project:Initial investment: $229,700Fixed costs: $66,800Variable costs: $5.07 per unitSelling price: $12.99 per unitDiscount rate: 14 percentProject life: 4 yearsTax rate: 34 percentDepreciation is straight-line to zero over the project's life. What is the accounting break-even point?A. 11,301.82 unitsB. 13,200.00 unitsC. 15,684.97 unitsD. 10,352.08 unitsE. 12,388.60 units

Answer 1

15,684.97 units

Step-by-step explanation:

Given that

Initial investment = $229,700

Project life = 4 year

Fixed cost = $66,800

Price variable cost = $5.07

Selling price = $12.99

Variable costs = $5.07

The computation of break-even point is shown below:-

Depreciation = Initial investment ÷ Project life

= $229,700 ÷ 4

= $57,425

Break even point = (Fixed cost + Depreciation) ÷ (Price variable cost)

= ($66,800 + $57,425) ÷ ($12.99 - $5.07)

= 15,684.97 units