A project has a contribution margin of $3.20, projected fixed costs of $9,400, projected variable costs per unit of $7.25, and a projected financial break-even point of 6,100 units. What is the operating cash flow at this level of output?
A) $10,120
B) $10,487
C) $10,504
D) $10,523
E) $10,698

Question

Quizplus · Accepted Answer

The operating cash flow at the financial break-even point is equal to the contribution margin per unit multiplied by the number of units sold at the break-even point, minus the fixed costs. In this case, the contribution margin per unit is $3.20, the number of units sold at the break-even point is 6,100, and the fixed costs are $9,400. Therefore, the operating cash flow at the financial break-even point is $3.20 * 6,100 - $9,400 = $10,120.

A Project Has a Contribution Margin of $3