Question

At least one of these answers are wrong (probably more). Please help me correct this problem.

In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Case Unit Price 1 $ 3,310 2 136 Unit Variable Cost $ 2,635 77 7 Fixed Costs $ 9,120,000 49,000 3,500 Depreciation $3,700,000 330,000 990 3 29 Case 1 Accounting break-even 18,299.5 6,423.73 204.09 Cash break-even 13,511.11 830.51 159.09

Answer 1

Case 1:

Cash Breakeven Point = Fixed Costs / (Unit Price - Unit Variable Cost)
Cash Breakeven Point = $9,120,000 / ($3,310 - $2,635)
Cash Breakeven Point = 13,511.11

Accounting Breakeven Point = (Fixed Costs + Depreciation) / (Unit Price - Unit Variable Cost)
Accounting Breakeven Point = ($9,120,000 + $3,700,000) / ($3,310 - $2,635)
Accounting Breakeven Point = 18,992.59

Case 2:

Cash Breakeven Point = Fixed Costs / (Unit Price - Unit Variable Cost)
Cash Breakeven Point = $49,000 / ($136 - $77)
Cash Breakeven Point = 830.51

Accounting Breakeven Point = (Fixed Costs + Depreciation) / (Unit Price - Unit Variable Cost)
Accounting Breakeven Point = ($49,000 + $330,000) / ($136 - $77)
Accounting Breakeven Point = 6,423.73

Case 3:

Cash Breakeven Point = Fixed Costs / (Unit Price - Unit Variable Cost)
Cash Breakeven Point = $3,500 / ($29 - $7)
Cash Breakeven Point = 159.09

Accounting Breakeven Point = (Fixed Costs + Depreciation) / (Unit Price - Unit Variable Cost)
Accounting Breakeven Point = ($3,500 + $990) / ($29 - $7)
Accounting Breakeven Point = 204.09