The Motor Works is considering an expansion project with estimated fixed costs o

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

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