The Motor Works is considering an expansion project with estimated fixed costs o
ID: 2730755 • Letter: T
Question
The Motor Works is considering an expansion project with estimated fixed costs of $87,000, depreciation of $22,900, variable costs per unit of $22.37, and an estimated sales price of $28.50 per unit. How many units must the firm sell to breakeven on a cash basis?
The Motor Works is considering an expansion project with estimated fixed costs of $87,000, depreciation of $22,900, variable costs per unit of $22.37, and an estimated sales price of $28.50 per unit. How many units must the firm sell to breakeven on a cash basis?
Explanation / Answer
BEP=Fixed costs/Contribution per unit
BEP=87000/(28.5-22.37)
=14192.4959
=14193 units