Consider the following cases: Unit Variable Cost 3,750 29.64 Fixed Costs $17,000

Question

Consider the following cases: Unit Variable Cost 3,750 29.64 Fixed Costs $17,000,000 17,000 900 Unit Price 5,000 39 $ 6,800,000 34,000 630 2 3.38 Ignore any tax effects in calculating the cash break-even. Requirement 1: (a) Calculate the cash break-even point of Case 1. (Do not round your intermediate calculations.) 13,600 (b) Calculate the accounting break-even point of Case 1. (Do not round your intermediate calculations.) 13,600 Requirement 2: (a) Calculate the cash break-even point of Case 2. (Do not round your intermediate calculations.) 1,816 (b) Calculate the accounting break-even point of Case 2. (Do not round your intermediate calculations.) 1,816 Requirement 3: (a) Calculate the cash break-even point of Case 3. (Do not round your intermediate calculations.) 160 (b) Calculate the accounting break-even point of Case 3. (Do not round your intermediate calculations.) 160

Explanation / Answer

Formulas Cash Break-even Point = (Fixed costs - Depreciation)/Contribution per unit Accounting Break-even Point = Fixed costs /Contribution per unit Assuming Fixed cost does not includes depreciation Requirement 1. Case 1 Cash Break-even Point = 17,000,000/ (5,000-3,750) Cash Break-even Point = 13,600 units Accounting Break-even Point = (17,000,000+6,800,000)/ (5,000-3,750) Accounting Break-even Point = 19,040 units Requirement 2. Case 2 Cash Break-even Point = 17,000/ (39-29.64) Cash Break-even Point = 1,816 units Accounting Break-even Point = (17,000+34,000)/ (39-29.64) Accounting Break-even Point = 5,449 units Requirement 3 Case 3 Cash Break-even Point = 900/ (9-3.38) Cash Break-even Point = 160 units Accounting Break-even Point = (900+630)/ (9-3.38) Accounting Break-even Point = 272 units

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