Break-even analysis<?xml:namespace prefix = o ns = \"urn:schemas-microsoft-com:o
ID: 2702631 • Letter: B
Question
Break-even analysis<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Given the following information:
Acctng price Variable Fixed Depreciation
A 6,270 _______ $57 $103,000 $24,000
B 730 $950 ______ $496,000 $98,000
C 1,970 $21 $14 $4,900 _______
D 1,970 $21 $8 ________ $12,000
A. Calculate the missing information for each of the above projects.
B. Note that Projects C and D share the same accounting break-even. If sales are above the break-even point, which project would you prefer? Explain Why.
C. Calculate the cash break-even for each of the above projects. What do the differences in accounting and cash break-even tell you about the four projects?
Explanation / Answer
Break even analysis
project
Break even point (units)
price per unit
variable cost per unit
fix cost per unit
depreciation
A
6260
$77
$58
$98,000
$22,000
B
770
$990
$215
$498,000
$99,000
C
1980
$20
$14
$4,500
$7,380
D
1980
$20
$8
$8,760
$15,000
b) Among C & D, choose D for lower cost
project
Break even point (units)
price per unit
variable cost per unit
fix cost per unit
depreciation
A
6260
$77
$58
$98,000
$22,000
B
770
$990
$215
$498,000
$99,000
C
1980
$20
$14
$4,500
$7,380
D
1980
$20
$8
$8,760
$15,000