Question

A project has the following estimated data: price = $90 per unit; variable costs = $36.9 per unit; fixed costs = $7,700; required return = 15 percent; initial investment = $10,000; life = five years. Ignore the effect of taxes. Required: (a) What is the accounting break-even quantity? (Do not round your intermediate calculations.) (b) What is the cash break-even quantity? (Do not round your intermediate calculations.) (c) What is the financial break-even quantity? (Do not round your intermediate calculations.) (d) What is the degree of operating leverage at the financial break-even level of output? (Do not round your intermediate calculations.)

Answer #1

Depreciation = Initial Investment / Life = $10,000/5 = $2,000

a). Q_{A} = (FC + D) / (P - V)

= ($7,700 + $2,000) / ($90 - $36.9)

= $9,700 / $53.10 = 182.67

b). Q_{C} = FC / (P - V)

= $7,700 / ($90 - $36.9)

= $7,700 / $53.10 = 145.01

c). The PV of the OCF must be equal to this value at the financial breakeven since the NPV is zero, so

$10,000 = OCF(PVIFA15%,5)

$10,000 = OCF x 3.3522

OCF = $10,000/3.3522 = $2,983.12

Q_{F} = (FC + OCF) / (P - V)

= ($7,700 + $2,983.12) / ($90 - $36.9)

= $10,683.12 / $53.10 = 201.19

d). DOL = [Q(P - V)] / [{Q(P - V)} - FC]

= [201.19($90 - $36.9)] / [{201.19($90 - $36.9)} - $7,700]

= $10,683.12 / [$10,683.12 - $7,700]

= $10,683.12 / $2,983.12 = 3.58x

A project has the following estimated data: price = $80 per
unit; variable costs = $46.4 per unit; fixed costs = $6,100;
required return = 12 percent; initial investment = $8,000; life =
three years. Ignore the effect of taxes.
Required:
(a)
What is the accounting
break-even quantity? (Do not round your intermediate
calculations.)
(Click to select)182 261 287 313
248
(b)
What is the cash break-even
quantity? (Do not round your intermediate
calculations.)
(Click to select)164 173...

A project has the following estimated data: price = $52 per
unit; variable costs = $33 per unit; fixed costs = $15,500;
required return = 12 percent; initial investment = $32,000; life =
four years.
Ignoring the effect of taxes, what is the accounting break-even
quantity? (Do not round intermediate calculations. Round
your answer to 2 decimal places, e.g., 32.16.)
Break-even quantity
What is the cash
break-even quantity? (Do not round intermediate
calculations. Round your answer to 2...

A project has the following estimated data: Price = $48 per
unit; variable costs = $32 per unit; fixed costs = $20,500;
required return = 8 percent; initial investment = $36,000; life =
six years. a. Ignoring the effect of taxes, what is the accounting
break-even quantity? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.) b. What is the
cash break-even quantity? (Do not round intermediate calculations
and round your answer to 2...

A project has the following estimated data: price = $58 per
unit; variable costs = $26.68 per unit; fixed costs = $5,600;
required return = 17 percent; initial investment = $13,000; life =
six years. Ignoring the effect of taxes:
Question 1: The quantity where
operating cash flow equals depreciation is ____ units.
(Round your answer to 2 decimal places. (e.g.,
32.16))
Question 2: The quantity where operating cash flow
would be zero is ____ units. (Round your answer to...

Consider a project with the following data: accounting
break-even quantity = 5,500 units; cash break-even quantity = 5,000
units; life = six years; fixed costs = $170,000; variable costs =
$26 per unit; required return = 8 percent. Ignoring the effect of
taxes, find the financial break-even quantity. (Do not
round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)

Consider a project with the following data: accounting
break-even quantity = 5,400 units; cash break-even quantity = 5,000
units; life = five years; fixed costs = $200,000; variable costs =
$38 per unit; required return = 10 percent. Ignoring the effect of
taxes, find the financial break-even quantity.
(Do not round intermediate calculations and round your
final answer to 2 decimal places, e.g., 32.16.)

Cantor Products sells a product for $90. Variable costs per unit
are $33, and monthly fixed costs are $210,900.
a. What is the break-even point in
units?
b. What unit sales would be required to earn a
target profit of $513,000?
c. Assume they achieve the level of sales required
in part b, what is the degree of operating leverage? (Round
your answer to 3 decimal places.)
d. If sales decrease by 30% from that level, by
what percentage...

XYZ Co. is evaluating whether to
invest in a project with the following information:
Project cost = $950,000
Project life = five years
Projected number of units sold per
year = 10,000
Projected price per unit = $200
Projected variable cost per unit =
150
Fixed costs per year = $150,000
Required rate of return = 15%
Marginal tax rate = 35%
Assume straight-line depreciation to
zero over five years, and ignore the half-year rule for accounting
for depreciation.
Calculate...

We are evaluating a project that costs $844,200, has a nine-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 80,000 units per year. Price per unit is $54, variable
cost per unit is $38, and fixed costs are $760,000 per year. The
tax rate is 23 percent, and we require a return of 10 percent on
this project.
a-1.
Calculate the accounting break-even point....

Cantor Products sells a product for $85. Variable costs per unit
are $35, and monthly fixed costs are $235,000.
a. What is the break-even point in units?
b. What unit sales would be required to earn a
target profit of $330,000?
c. Assume they achieve the level of sales required
in part b, what is the degree of operating leverage? (Round
your answer to 3 decimal places.)
d. If sales decrease by 30% from that level, by
what percentage...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 27 minutes ago

asked 27 minutes ago

asked 52 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago