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.)
Initial outlay : $80,000
selling price : $93 per unit
variable cost : $66 per unit
Fixed costs without Depreciation : $20,000 per year
Rate of return : 10% per year
EAC = Initial Investment / (5 year 10% annuity factor)
EAC = $80000 / 2.52719
EAC = $31655.6977
Total fixed cost : $20000 + $31655.6977 = $51655.6977 per year
BEP (units) = Fixed costs/Selling price per unit- variable costs per unit.
BEP (units) = $51655.6977/(93-66) =1913.1739 = 1914 Units
Get Answers For Free
Most questions answered within 1 hours.