Consider a project with the following data: accounting break-even quantity = 20,
ID: 2756895 • Letter: C
Question
Consider a project with the following data: accounting break-even quantity = 20,400 units; cash break-even quantity = 19,000 units; life = eight years; fixed costs = $190,000; variable costs = $42 per unit; required return = 15 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.)
Consider a project with the following data: accounting break-even quantity = 20,400 units; cash break-even quantity = 19,000 units; life = eight years; fixed costs = $190,000; variable costs = $42 per unit; required return = 15 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.)
Explanation / Answer
Break even Quantity = Fixed cost / Price - variable cost
P = price per unit
Price per unit = Total cost / total quantity
= fixed cost + variable cost / total quantity
= 190000 + 856800 / 20400
= 51
BEQ = 190000 / 51 - 42 = 21111.