4. Annual depreciation using straight line is $6,000 for a 4 year project. The d

Question

4. Annual depreciation using straight line is $6,000 for a 4 year project. The discount rate is 12%, the selling price per unit is $62, while variable cost of materials is $17 and variable cost of labor is $24. Fixed cost is $15,500. What is the financial break-even number of units?

A. 842.58

B. 1,005.00

C. 1,114.36

D. 1,287.69

E. 1,658.00

5. A new product requires an initial investment of $5 million and will be depreciated straight line to an expected salvage of zero over 5 years. The selling price of the new product is expected to be $25,000, and the variable cost per unit is $15,000. The fixed cost is $1 million. What is the accounting break-even point?

A. 92 units

B. 100 units

C. 177 units

D. 200 units

E. 300 units

6. We are evaluating a project that costs $573,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $46, variable cost per unit is $31, and fixed costs are $825,000 per year. What is the degree of operating leverage at the accounting break-even point?

A. 5.984

B. 6.548

C. 7.522

D. 8.143

E. 9.639

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