A project requires an initial equipment purchase of $480,000, which will be depreciated straight- line to zero over the life of the project. The equipment will have no salvage value. Annual ﬁxed
Costs are projected at $266,800. The selling price per unit is $9.90 with a variable cost per unit of
$6)65. The project has a 6-year life and a required rate of return of 12%. What is the accounting
Break-even quantity if taxes are ignored?
A) 82,092
B) 91,538
C) 106,708
D) 109,813
E) 112,634

Question

Quizplus · Accepted Answer

The accounting break-even quantity can be calculated using the following formula:

Accounting Break-even quantity = (Fixed costs + Depreciation)/(Selling price per unit - Variable cost per unit)

Substituting the given values, we get:

Accounting Break-even quantity = (266,800 + (480,000/6))/(9.90 - 6.65) = 106,708

Therefore, the accounting break-even quantity is 106,708 units.

Since this is the minimum quantity that must be sold to cover all costs and earn no profit, the project must sell more than 106,708 units to be profitable.

Hence, the best choice is C.

A Project Requires an Initial Equipment Purchase of $480,000, Which