A proposed project has fixed costs of $3,700, depreciation expense of $1,400, and a sales quantity of 1,500 units. What is the contribution margin if the projected level of sales is the accounting break-even point?
A) $2.47
B) $2.64
C) $3.10
D) $3.40
E) $3.71

Question

Quizplus · Accepted Answer

At the accounting break-even point, total revenues equal total expenses, which include both fixed costs and depreciation. The formula to find the contribution margin (CM) at this point is: CM = (Fixed Costs + Depreciation) / Sales Quantity. Plugging in the given values: CM = ($3,700 + $1,400) / 1,500 = $5,100 / 1,500 = $3.40.

A Proposed Project Has Fixed Costs of $3,700, Depreciation Expense