A project has the following estimated data: price = $150 per unit; variable costs = $88 per unit; fixed costs = $250,000; required return = 11%; initial investment = $200,000; $50,000 salvage value; life = ten years. What is the cash break-even quantity?
A) 4,032 units.
B) 4,274 units.
C) 4,532 units.
D) 4,784 units.
E) 4,955 units.

Question

Quizplus · Accepted Answer

The cash break-even quantity is calculated by dividing the total fixed costs by the contribution margin per unit. The contribution margin per unit is the price per unit minus the variable costs per unit. In this case, the contribution margin per unit is $150 - $88 = $62. The total fixed costs are $250,000. Therefore, the cash break-even quantity is $250,000 / $62 = 4,032 units.

A Project Has the Following Estimated Data: Price = $150