QUESTION 23 A company is considering a 5-year project that opens a new product l

Question

QUESTION 23 A company is considering a 5-year project that opens a new product line and requires an initial outlay of $81,000. The assumed selling price is $95 per unit, and the variable cost is $67 per unit. Fixed costs not including depreciation are $23,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 12% per year, what is the accounting break-even point? (Answer to the nearest whole unit.) QUESTION 24 A company is considering a 5-year project that opens a new product line and requires an initial outiay of $78,000. The assumed selling price is $91 per unit, and the variable cost is $58 per unit. Fixed costs not including depreciation are $22.000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 14% per year, what is the casn break-even point? (Answer to the nearest whoie unit.)

Explanation / Answer

Contribution margin per unit = 95 - 67 = 28

Depreciation under straight line method = 81000 / 5 years = 16200

Fixed cost ( including depreciation ) = 23000 + 16200 = 39200

Accounting BEP = Fixed cost / CM per unit = 39200 / 28 = 1400 units ............final answer

Question - 24

CM per unit = 91 - 56 = 35

Fixed cost = 22000 ( not including depreciation)

Cash BEP = 22000 / 35 = 628.57 Units...............final answer

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