Which one of the following is defined as the sales level that corresponds to a z

Question

Which one of the following is defined as the sales level that corresponds to a zero NPV?

A company is considering a project with a cash break-even point of 22,600 units. The selling price is $28 a unit, the variable cost per unit is $13, and depreciation is $14,000. What is the projected amount of fixed costs?

Wexford Industrial Supply is considering a new project with estimated depreciation of $26,000, fixed costs of $79,000, and total sales of $187,000. The variable costs per unit are estimated at $11.80. What is the accounting break-even level of production?

accounting break-even leveraged break-even marginal break-even cash break-even financial break-even

Explanation / Answer

1) Financial breakeven = Level of earnings before interest and tax (EBIT) at which a firm's earnings per share equal zero.

2) Cash break even = 22600* (28 - 13) = 339000 (all terms are given in question)

we wiil not consider depreciation for the cash break even because it is a non cash item.

3) Accounting break even = 187000 - 26000 -79000 = 82000 (all terms are given in question)

number of units at which company will achieve accounting break even = 82000 / 11.8 = 6949

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.