What is the accounting break-even point? Price = $100 per unit; variable cost = $24 per unit; ﬁxed cost = $40,000 per year; depreciation = $10,000 per year. Assume a discount rate of 10%, project
Initial outlay of $100,000, project life of 10 years, and ignore taxes.
A) 527 units
B) 624 units
C) 658 units
D) 925 units
E) 1,130 units

Question

Quizplus · Accepted Answer

To find the accounting break-even point, we need to calculate the unit sales at which the total revenue equals total costs.

Total cost = Fixed cost + (Variable cost per unit x Sales) + Depreciation
Total cost = $40,000 + ($24 x Q) + $10,000
Total cost = $50,000 + ($24 x Q)

Total revenue = Price per unit x Sales
Total revenue = $100 x Q

At the break-even point, Total revenue = Total cost
$100Q = $50,000 + ($24 x Q)
$76Q = $50,000
Q = 657.89

Rounding up, the accounting break-even point is 658 units. Therefore, the best choice is C.

What Is the Accounting Break-Even Point? Price = $100 Per