Loretta & Nieces fixed costs are $425,000, including $25,000 of depreciation expense. The price of each unit sold is $120, and the variable cost per unit is $60. How many units must the firm sell to reach the cash break-even point?
A) less than 7,333 units
B) 7,333 units
C) More than 7,333 units
D) not enough information has been provided to determine the cash break-even point

Question

Quizplus · Accepted Answer

To find the cash break-even point, we exclude non-cash expenses like depreciation. Fixed costs excluding depreciation are $400,000 ($425,000 - $25,000). The contribution margin per unit is $60 ($120 - $60). The cash break-even point is $400,000 / $60 = 6,667 units, which is less than 7,333 units.

Loretta & Nieces Fixed Costs Are $425,000, Including $25,000 of Depreciation