The Mini-Max Company has the following cost information on their new prospective project. Fixed costs are $200/year. (Initial investment is $700).
Variable costs: $3/unit.
Depreciation: $140/year.
Price: $8/unit.
Discount rate: 12%.
Project life: 5 years.
Tax rate: 34%.
Calculate the accounting break-even point.
A) 68.00 units/year.
B) 103.03 units/year.
C) 113.33 units/year.
D) 25.00 units/year.

Question

Quizplus · Accepted Answer

The accounting break-even point is calculated as the point where total revenue equals total costs (including operating costs and depreciation, but excluding the initial investment, interest, and taxes). It can be found using the formula: Break-even point in units = (Fixed Costs + Depreciation) / (Price - Variable Costs). Plugging in the given values: Break-even point = ($200 + $140) / ($8 - $3) = $340 / $5 = 68 units/year.

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