Given the following information, calculate OCF at the accounting break-even point. Price = $30; variable cost = $10; fixed cost = $25,000; depreciation = $5,000; tax rate = 34%.
A) $1,750
B) $5,000
C) $15,000
D) $25,000
E) $35,000

Question

Quizplus · Accepted Answer

At the accounting break-even point, a company's total revenue equals its total expenses (excluding interest and taxes). To calculate the Operating Cash Flow (OCF) at this point, we use the formula: OCF = (Sales - Variable Costs - Fixed Costs + Depreciation) * (1 - Tax Rate) + Depreciation. At the break-even point, Sales = Variable Costs + Fixed Costs. Substituting the given values: OCF = ($25,000 + $5,000) * (1 - 0.34) + $5,000 = $5,000.

Given the Following Information, Calculate OCF at the Accounting Break-Even