You would like to know the minimum level of sales that is needed for a project to be accepted based on its net present value.To determine that sales level you should compute the:
A)contribution margin per unit and set that margin equal to the fixed costs per unit.
B)contribution margin per unit.
C)accounting break-even point.
D)cash break-even point.
E)financial break-even point.

Question

Quizplus · Accepted Answer

The financial break-even point takes into account the net present value of a project and calculates the level of sales needed to cover all costs, including the cost of capital. It is the most appropriate choice for determining the minimum level of sales needed for a project to be accepted. Option A is incorrect because it only takes into account variable costs and not the cost of capital. Option B is also incorrect because it does not consider fixed costs and the cost of capital. Option C and D are incorrect because they only consider the minimum sales needed to cover costs and do not take into account the cost of capital.

You Would Like to Know the Minimum Level of Sales