Variable cost for Light.com's fluorescent tubes is $12.50, the tubes are sold over the internet to businesses and organizations for $20.00 each. Fixed costs are $7,500,000. $500,000 in depreciation expense is included in fixed costs. What is the cash break-even quantity for the fluorescent tubes?
A) 933,333
B) 1,000,000
C) 375,000
D) 1,066,667

Question

Quizplus · Accepted Answer

The cash break-even point is calculated by excluding non-cash expenses like depreciation from fixed costs. Thus, the adjusted fixed costs are $7,000,000 ($7,500,000 - $500,000). The contribution margin per unit is $7.50 ($20.00 - $12.50). The cash break-even quantity is $7,000,000 / $7.50 = 933,333 units.

Variable Cost for Light