Question

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 and round your answers to 2 decimal places, e.g., 32.16.)

    

Case	Unit Price			Unit Variable Cost			Fixed Costs			Depreciation
1	$	2,830		$	2,315		$	8,000,000		$	2,460,000
2		56			45			45,000			170,000
3		13			4			1,900			800

	Case Accounting break-even Cash break-even 1 2 3

Answer 1

Case 1 Accounting Breakeven=(Depreciation + fixed cost)/( Sales - Variable)=(8000000+2460000)/(2830-2315) =20310.68
Cash break-even quantity =Fixed Cost/(Sales-Variable) =(8000000)/(2830-2315) =15533.98

Case 2 Accounting Breakeven=(Depreciation + fixed cost)/( Sales - Variable)=(170000+45000)/(56-45) =19545.45
Cash break-even quantity =Fixed Cost/(Sales-Variable) =(1700000)/(56-45) =154545.45

Cash 3  Accounting Breakeven=(Depreciation + fixed cost)/( Sales - Variable)=(1900+800)/(13-4) =300.00
Cash break-even quantity =Fixed Cost/(Sales-Variable) =1900/(13-4) =211.11