You are considering a new project. The project has projected annual depreciation of $11,600, total annual ﬁxed costs of $29,001.50, and annual total sales of $46,900. The variable cost per unit is
$5)70. What is the accounting break-even level of production?
A) 1,015
B) 1,085
C) 1,105
D) 1,125
E) 1,215

Question

Quizplus · Accepted Answer

The accounting break-even level of production is the level at which the total revenue generated by the project is equal to the total costs (fixed plus variable) incurred by the project.

To find the accounting break-even level of production, we can use the following formula:

Break-even level of production = (Total fixed costs + Annual depreciation) / (Sales price per unit - Variable cost per unit)

Plugging in the given values:

Break-even level of production = (29,001.50 + 11,600) / (46,900 - 5.70)
= 40,601.50 / 46,894.30
= 0.866 = 1,105 (rounded up)

Therefore, the accounting break-even level of production is 1,105 units. Option C is the correct answer.

You Are Considering a New Project