The Mini-Max Company has the following cost information on its new prospective project. Calculate the accounting break-even point.
Initial investment: $700
Fixed costs: $200 per year
Variable costs: $3 per unit
Depreciation: $140 per year
Price: $8 per unit
Discount rate: 12%
Project life: 5 years
Tax rate: 34%
A) 25 units per year
B) 68 units per year
C) 103 units per year
D) 113 units per year
E) None of these.

Question

Quizplus · Accepted Answer

The accounting break-even point is calculated by dividing the total fixed costs (including depreciation) by the contribution margin per unit. Fixed costs are $200, and depreciation is $140, totaling $340. The contribution margin per unit is $8 (price) - $3 (variable cost) = $5. Therefore, the break-even point is $340 / $5 = 68 units per year.

The Mini-Max Company Has the Following Cost Information on Its