A project has the following estimated data: price = $89 per unit; variable costs

Question

A project has the following estimated data: price = $89 per unit; variable costs = $33.82 per unit; fixed costs = $5,100; required return = 10 percent; initial investment = $11,000; life = seven years. Ignore the effect of taxes.

145, 133, 92, 121, 115

What is the cash break-even quantity? (Do not round your intermediate calculations.)

87,92,74,83,121

What is the financial break-even quantity? (Do not round your intermediate calculations.)

160,133,120,106,146

What is the degree of operating leverage at the financial break-even level of output? (Do not round your intermediate calculations.)

1.8759, 1.6595, 1.2266, 3.2572, 1.0101

A project has the following estimated data: price = $89 per unit; variable costs = $33.82 per unit; fixed costs = $5,100; required return = 10 percent; initial investment = $11,000; life = seven years. Ignore the effect of taxes.

Explanation / Answer

Price 89/unit Variable cost 33.82/unit Contibution margin/unit 55.18 Initial Fixed cost 11000 Fixed cost 5100 a) Accounting break even point = Fixed cost/ Contribution margin per unit 92.42479159 b) Cash break even point= (Fixed cost-non cash expenses)/ Contibution margin per unit As there is no clarity on how much is the non cash expense in the given fixed cost so full Fixed cost will be treated as cash expense Cash break even point= 92.42479159

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