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 and round your answers to 2 decimal places, e.g., 32.16.)

Case Unit Price Unit Variable Cost Fixed Costs Depreciation
1 $3,190 $2,555 $8,080,000 $2,860,000
2 116 69 48,000 290,000
3 25 6 3,100 840

Answer 1

Accounting Breakeven = (Fixed Costs + Depreciation)/ ( Sales price - Variable cost)

Cash Breakeven = Fixed Costs / ( Sales price - Variable cost)

1.

Accounting Breakeven = (8,080,000 + 2,860,000) / (3,190 - 2,555) = 17,228.34

Cash Breakeven = 8,080,000/ (3,190 - 2,555) = 12,724.41

2. Accounting Breakeven = (48,000 + 290,000) / ( 116 - 69) = 7,191.49

Cash breakeven = 48,000/ (116 - 69) = 1,021.28

3. Accounting breakeven = (3,100 + 840) / (25 - 6) = 207.37

Cash breakeven = 3,100/(25 - 6) = 163.16