PLEASE ROUND AS INSTRUCTIONS SAYS! THANK YOU IN ADVANCE A project has the follow

Question

PLEASE ROUND AS INSTRUCTIONS SAYS! THANK YOU IN ADVANCE

A project has the following estimated data: price = $66 per unit; variable costs = $43 per unit; fixed costs = $16,500; required return = 8 percent; initial investment = $25,000; life = five years.

Ignoring the effect of taxes, what is the accounting break-even quantity? (Round your answer to 2 decimal places. (e.g., 32.16))

What is the financial break-even quantity? (Round your answer to 2 decimal places. (e.g., 32.16))

What is the degree of operating leverage at the financial break-even level of output? (Round your answer to 3 decimal places. (e.g., 32.161))

A project has the following estimated data: price = $66 per unit; variable costs = $43 per unit; fixed costs = $16,500; required return = 8 percent; initial investment = $25,000; life = five years.

Explanation / Answer

Answer : Accounting break even quantity = Fixed Cost / Contribution per unit

= 16500/ (66-43)

= 16500/23

= 717.39

Cash Break Even point will be equal to the accounting break even point as there is no aspect mentioned related to credit or cash sales thus both will be same. cash Break even point is the point at which sales cash revenue equals the variable and fixed expenses.

Financial Break even point is the quantity at which the earnings before interest and tax are equal to zero. in this question as there is no data provided regarding the debt thus assuming it to be zero. Guven the above circumstances the financial break even point will also be same as n above two cases.

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