Break-even analysis<?xml:namespace prefix = o ns = \"urn:schemas-microsoft-com:o

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             6,280 _______     $52          $97,000             $24,000

B             740         $1,010   ______   $495,000           $100,000

C             2,000     $21            $15        $4,900                 _______

D             2,000     $21              $5 ________                             $15,000

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

Please only rate correct answers. Aman just copied from a different place which is why his numbers are all off.

A.

Price = (fixed cost+depreciation)/total units + variable cost
(97000+24000)/6280+52 = 71.27

Move the equation to solve for variable cost
Price - (fixed cost+depreciation)/total units = variable cost

1010-(495000+100000)/740= 205.95

Same for depreciation
21=(4900+x)/2000+15, x = 7100

(2000*(21-5))-15000= 17000

B. D cause lower variable cost and contribution per unit

C. fixed cost = (price-variable cost)*units sold.
97000/(71.27-52) = 5034

495000/(1010-205.95) = 616

4900/(21-15) = 819

17000/(21-5) = 1062.5

Accounting is higher since it includes depreciation. Hope that helps.

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