What is the cash break-even point? Price = $100 per unit; variable cost = $24 per unit, fixed cost = $40,000 per year; depreciation = $10,000 per year. Assume a discount rate of 10%, project initial outlay of $100,000, project life of 10 years, and ignore taxes.
A) 527 units
B) 624 units
C) 658 units
D) 741 units
E) 1,130 units

Question

Quizplus · Accepted Answer

The cash break-even point is calculated by dividing the total fixed costs (excluding non-cash expenses like depreciation) by the price per unit minus variable cost per unit. Here, fixed costs are $40,000 (depreciation is not included since it's a non-cash expense), price per unit is $100, and variable cost per unit is $24. So, the calculation is $40,000 / ($100 - $24) = $40,000 / $76 = 526.3158, which rounds to 527 units.

What Is the Cash Break-Even Point? Price = $100 Per