Your company is considering a new project with estimated depreciation of $630, fixed costs of $5,000, and total sales of $10,050. The variable cost per unit is estimated at $3.75. What is the accounting break-even level of production?
A) 1,100 units
B) 1,179 units
C) 1,216 units
D) 1,298 units
E) 1,347 units

Question

Quizplus · Accepted Answer

The accounting break-even level of production is calculated by dividing the total fixed costs plus depreciation by the contribution margin per unit (sales price per unit - variable cost per unit). However, without the sales price per unit, we can approach this by using the formula for accounting break-even in terms of total sales, fixed costs, and depreciation: $ \text{Accounting Break-even level of production} = \frac{\text{Fixed Costs} + \text{Depreciation}}{\text{Total Sales} - \text{Total Variable Costs}} $. Given that we don't have the exact sales price per unit or the total variable costs directly, we can't directly apply the formula as intended. The correct approach involves understanding that the break-even point in units can also be found by dividing the sum of fixed costs and depreciation by the contribution margin per unit, which we can't directly calculate without the sales price per unit. Given the information provided and the typical approach to finding the accounting break-even point, there seems to be a misunderstanding in the explanation process due to the lack of specific details like the sales price per unit. The correct calculation should involve determining the contribution margin per unit first, which cannot be accurately done with the given data. Therefore, without the sales price per unit, we cannot directly calculate the break-even level of production accurately. The correct answer relies on additional information or a different approach to the calculation that aligns with the provided choices.

Your Company Is Considering a New Project with Estimated Depreciation