A project has the following estimated data: price = $56 per unit; variable costs

Question

A project has the following estimated data: price = $56 per unit; variable costs = $35 per unit; fixed costs = $18,500; required return = 8 percent; initial investment = $45,000; life = five years.

Ignoring 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.)

Explanation / Answer

Break even quantity= Fixed cost/(selling price per unit-variable costs)
=18500/(56-35)
   =18500/21
=880.95 units

Cash break even point=fixed cost-non cash expenses/(selling price per unit-variable cost)
since no non cash expenses, therefore

cash break even point=880.95 units

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