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Consider the following cases:    Case Unit Price Unit Variable Cost Fixed Costs Depreciation 1 $...

Consider the following cases:

  

Case Unit Price Unit Variable
Cost		 Fixed Costs Depreciation
1 $ 3,000          $ 2,220          $ 15,000,000        $ 5,400,000       
2 40          28          15,000        36,000       
3 8          3.4          800        560       

  

Ignore any tax effects in calculating the cash break-even.

  

1a. Calculate the cash break-even point of Case 1.

  

1b. Calculate the accounting break-even point of Case 1.

  

2a. Calculate the cash break-even point of Case 2.

  

2b. Calculate the accounting break-even point of Case 2.

  

3a. Calculate the cash break-even point of Case 3.

  

3b. Calculate the accounting break-even point of Case 3.
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Answer #1

Cash Break Even Point = [ Fixed Cost ] / [ Sale Price - Variable Cost ]

Account Break Even Point = [ Fixed Cost + Depreciation ] / [ Sale Price - Variable Cost ]

Part 1A:

Cash Break Even Point = [ Fixed Cost ] / [ Sale Price - Variable Cost ]

= $ 15,000,000 / [ $ 3000 - $2220 ]

= $ 15,000,000 / $ 780

= 19231

Part 1B

Account Break Even Point = [ Fixed Cost + Depreciation ] / [ Sale Price - Variable Cost ]

= [ $ 15,000,000 + $5,400,000] / [ $ 3000 - $2220 ]

= $ 20,400,000 / $ 780

= 26154

Part 2A:

Cash Break Even Point = [ Fixed Cost ] / [ Sale Price - Variable Cost ]

= $ 15,000 / [ $ 40 - $28 ]

= $ 15,000 / $ 12

= 1250

Part 2B

Account Break Even Point = [ Fixed Cost + Depreciation ] / [ Sale Price - Variable Cost ]

= [ $ 15,000 + $36,000 ] / [ $ 40 - $28]

= $ 51,000 / $ 12

= 4250

Part 3A:

Cash Break Even Point = [ Fixed Cost ] / [ Sale Price - Variable Cost ]

= $ 800 / [ $ 8 - $ 3.4 ]

= $ 800 / $ 4.6

= 174

Part 2B

Account Break Even Point = [ Fixed Cost + Depreciation ] / [ Sale Price - Variable Cost ]

= [ $ 800 + $ 560 ] / [ $ 8 - $ 3.4]

= $ 1360 / $ 4.6

= 296

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