The Lakeside Inn is considering expanding their operations. Fixed costs are estimated at $92,000 a year. The variable cost per unit is estimated at $22.50. The estimated sales price is $37.50 per unit. What is the cash break-even point of this project? (Round to whole units.)
A) 6,133
B) 6,420
C) 6,667
D) 7,000
E) 7,180

Question

Quizplus · Accepted Answer

The cash break-even point is the number of units that must be sold to cover the fixed costs. To calculate this, we can use the formula:Cash break-even point = Fixed costs / (Sales price per unit - Variable cost per unit)Plugging in the given values, we get:Cash break-even point = 92,000 / (37.50 - 22.50) = 6,133.33Rounding to the nearest whole unit, the cash break-even point is 6,133 units.

The Lakeside Inn Is Considering Expanding Their Operations