Question

21. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $85,000. The assumed selling price is $97 per unit, and the variable cost is $61 per unit. Fixed costs not including depreciation are $20,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 11% per year, what is the accounting break-even point? (Answer to the nearest whole unit.)

22. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $80,000. The assumed selling price is $93 per unit, and the variable cost is $66 per unit. Fixed costs not including depreciation are $20,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 10% per year, what is the cash break-even point? (Answer to the nearest whole unit.)

23. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $80,000. The assumed selling price is $94 per unit, and the variable cost is $69 per unit. Fixed costs not including depreciation are $19,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 11% per year, what is the financial break-even point? (Answer to the nearest whole unit.)

Answer #1

**Answer to Question
No. 21**

Accounting Break Even Point = Fixed Cost / Contribution Margin per unit

Depreciation = (85,000 – 0) / 5

Depreciation = $17,000

Fixed Cost = $20,000 + $17,000

Fixed Cost = $37,000

Contribution Margin per unit = Selling Price per unit – Variable
Cost per unit

Contribution Margin per unit = $97 - $61

Contribution Margin per unit = $36

Accounting Break Even Point = 37,000 / 36

Accounting Break Even Point = 1,027.77

or **Accounting Break Even Point = 1,028 units**

22.
A company is considering a 5-year project that opens a new
product line and requires an initial outlay of $80,000. The assumed
selling price is $93 per unit, and the variable cost is $66 per
unit. Fixed costs not including depreciation are $20,000 per year.
Assume depreciation is calculated using stright-line down to zero
salvage value. If the required rate of return is 10% per year, what
is the cash break-even point? (Answer to the nearest whole
unit.)

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