A project has the following estimated data: price $58 per unit; variable costs $

Question

A project has the following estimated data: price $58 per unit; variable costs $36 per unit; fixed costs $20,000; required return 10 percent; initial investment $30,000; lifesix years. lgnoring the effect of taxes, what is the accounting break-even quantity? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Break-even quantity What is the cash break-even quantity? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Break-even quantity What is the financial break-even quantity? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Break-even quantity What is the degree of operating leverage at the financial break-even level of output? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.) DOL

Explanation / Answer

Accounting BEP = Fixed Cost / Sales - Variable Cost

Accounting BEP = $20000/$58-$36

Accounting BEP = $20000/$22

Accounting BEP = 909.09 units

Cash BEP will be same as Accounting BEP as there is no non cash items

Financial BEP

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