A company is considering a project with a cash break-even point of 26,394 units. The selling price is $19 a unit, the variable cost per unit is $7, and depreciation is $89,800. What is the projected amount of fixed costs?
A) $374,512
B) $316,728
C) $356,108
D) $288,512
E) $291,064

Question

Quizplus · Accepted Answer

The formula to find the cash break-even point is as follows:

Cash Break-Even Point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

Substituting the given values, we get:

26,394 = Fixed Costs / (19 - 7)

26,394 = Fixed Costs / 12

Fixed Costs = 26,394 * 12

Fixed Costs = 316,728

Therefore, the projected amount of fixed costs is $316,728 (Option B).

A Company Is Considering a Project with a Cash Break-Even