BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per unit sold is $10. Fixed costs are $30,000 per year.

Using the BASIC INFORMATION, compute the cash break-even point. (Ignore taxes.)
A) 1,800
B) 3,000
C) 4,200
D) 5,000
E) 7,000

Question

BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per unit sold is $10. Fixed costs are $30,000 per year.

Using the BASIC INFORMATION, compute the cash break-even point. (Ignore taxes.)

Using the BASIC INFORMATION, compute the cash break-even point. (Ignore taxes.)
A) 1,800
B) 3,000
C) 4,200
D) 5,000
E) 7,000

Quizplus · Accepted Answer

The cash break-even point is calculated by dividing the fixed costs by the contribution margin per unit (price per unit - variable cost per unit). Here, it is $30,000 / ($20 - $10) = 3,000 units.

BASIC INFORMATION: a Three-Year Project Will Cost $60,000 to Construct