Consider the following cases: Case Unit Price 6,000 43 Unit Variable Cost $ 4,50

Question

Consider the following cases: Case Unit Price 6,000 43 Unit Variable Cost $ 4,500 Fixed Costs $ 14,000,000 14,000 1,800 Depreciation $5,180,000 26,600 900 33.54 4.35 2 Ignore any tax effects in calculating the cash break-even Requirement 1 (a) Calculate the cash break-even point of Case 1. (Do not round your intermediate calculations.) (Click to select) (b) Calculate the accounting break-even point of Case 1. (Do not round your intermediate calculations.) (Click to select) Requirement 2 (a) Calculate the cash break-even point of Case 2. (Do not round your intermediate calculations.) (Click to select) (b) Calculate the accounting break-even point of Case 2. (Do not round your intermediate calculations.) (Click to select) Requirement 3 (a) Calculate the cash break-even point of Case 3. (Do not round your intermediate calculations.) (Click to select) (b) Calculate the accounting break-even point of Case 3. (Do not round your intermediate calculations.) (Click to select)

Explanation / Answer

Answer:

Cash Break – Even Point = Fixed Cost / (Unit Price – Variable Cost)

Accounting Break – Even Point = (Fixed Cost + Depreciation) / (Unit Price – Variable Cost)

Requirement 1:

Cash Break – Even Point = 14,000,000 / (6,000 – 4,500)
Cash Break – Even Point = 14,000,000 / 1,500
Cash Break – Even Point = 9,333.33 or 9,333 units

Accounting Break – Even Point = (14,000,000 + 5,180,000) / (6,000 – 4,500)
Accounting Break – Even Point = 19,180,000 / 1,500
Accounting Break – Even Point = 12,786.67 or 12,787 Units

Requirement 2:

Cash Break – Even Point = 14,000 / (43 – 33.54)
Cash Break – Even Point = 14,000 / 9.46
Cash Break – Even Point = 1,479.92 or 1,480 units

Accounting Break – Even Point = (14,000 + 26,600) / (43 – 33.54)
Accounting Break – Even Point = 40,600 / 9.46
Accounting Break – Even Point = 4,291.75 or 4,292 Units

Requirement 3:

Cash Break – Even Point = 1,800 / (11 – 4.35)
Cash Break – Even Point = 1,800 / 6.65
Cash Break – Even Point = 270.68 or 271 units

Accounting Break – Even Point = (1,800 + 900) / (11 – 4.35)
Accounting Break – Even Point = 2,700 / 6.65
Accounting Break – Even Point = 406.02 or 406 Units

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