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In: Finance

We are evaluating a project that costs $841,992, has an eight-year life, and has no salvage...

We are evaluating a project that costs $841,992, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60,261 units per year. Price per unit is $44, variable cost per unit is $19, and fixed costs are $420,392 per year. The tax rate is 35%, and we require a return of 20% on this project.

Calculate the Accounting Break-Even Point. (Round answer to 0 decimal places. Do not round intermediate calculations)

Solutions

Expert Solution

Annual Depreciation = (Cost Of The Asset- Salvage Value)/ Life Of The Asset
= $841992-0/8 years
= $105249 per year
Total fixed cost = $105249+420392
=$525641
Contribution Margin Per Unit = Sales price - variable cost per unit
= $44-19
= $25 per unit
Break-even Point In Unit = Fixed Cost/ Contribution Margin Per Unit
= $525641/25
=21026 units

jeff jeffy answered 2 years ago
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