Question

In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

Case Unit Price Unit Variable Cost Fixed Costs Depreciation
1 $3,070 $2,475 $7,060,000 $1,550,000
2 96 61 47,000 250,000
3 21 5 2,700 730

Answer 1

Accounting Break-Even

Case 1 = $14,350 Case 2 = $8,485.71 Case 3 = $214.375

Cash Break-Even

Case 1 = $11,766.67 Case 2 = $1342.86 Case 3 = $168.75

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Accounting Break-Even = (Fixed Cost + Depreciation Cost) ÷ (Price Unit -Variable Unit)

Case 1 - ($7,060,000 + $1,550,000) ÷ ($3075 - $2,475)

= $8,610,000 ÷ $600

= $14,350

Case 2 - ( $47,000 + $250,000) ÷ ($96 - $61)

= $297,000 ÷ 35 = $8,485.71

Case 3 - ($2,700 + $730) ÷ ($21 - $5)

= $3,430 ÷ $16 = $214.375

Cash Break Even = Fixed Cost ÷ (Price Unit - Variable Unit)

Case 1 - $7,060,000 ÷ ($3075 - $2,475)

= $7,060,000 ÷ $600

= $11,766.67

Case 2 - $47,000 ÷ ($96 - $61)

= $47,000 ÷ $35 = $1342.86

Case 3 - $2,700 ÷ ($21 - $5)

= $2,700 ÷ $16 = $168.75