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7. Calculating Break-Even [LO3] In each of the following cases, calculate the accounting break-even and the...

7. Calculating Break-Even [LO3] In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.

Unit Price Unit Variable Cost Fixed Costs Depreciation $2,980 46 9 $2,135 41 3 $8,100,000 185,000 2,770 $3,100,000 183,000 1,050

Solutions

Expert Solution

Case

Accounting Break - Even Point

Cash Break - Even Point

1

13,254.44 Units

9,585.80 Units

2

73,600.00 Units

37,000.00 Units

3

636.67 Units

461.67 Units

Accounting Break - Even Point = [Fixed costs + Depreciation] / [Unit selling Price – Variable cost ]

Cash Break - Even Point = Fixed costs / [ Unit selling Price – Variable cost]

CASE - 1

Accounting Break - Even Point

= [$81,00,000 + 31,00,000] / [$2,980 - $2,135]

= $112,00,000 / $845

= 13,254.44 Units

Cash Break - Even Point

= $81,00,000 / [$2,980 - $2,135]

= 9,585.80 Units

CASE - 2

Accounting Break - Even Point

= [$185,000 + 183,000] / [$46 - $41]

= $368,000 / $5

= 73,600.00 Units

Cash Break - Even Point

= $185,000 / [$46 - $41]

= 37,000 Units

CASE - 3

Accounting Break - Even Point

= [$2,770 + $1,050] / [$9 - $3]

= $3,820 / $6

= 636.67 Units

Cash Break - Even Point

= $2,770 / [$9 - $3]

= 461.67 Units

jeff jeffy answered 1 year ago
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