Question

The Financial Calculator Company proposes to invest $12 million in a new calculator-making plant that will depreciate on a straight-line basis. Fixed costs are $3 million per year. A financial calculator costs $10 per unit to manufacture and sells for $30 per unit. If the plant lasts for four years and the cost of capital is 20 percent, what is the accounting break-even level of annual sales? (Assume no taxes.)

Answer 1

Answer:

the accounting break-even level of annual sales is 300,000 units

Explanation:

The computation of the accounting-break even level of annual sales is shown below"

= (Fixed cost + depreciation expense) ÷ (contribution margin per unit)

= ($3 million + ($12 million ÷ 4 years) ÷ ($30 - $10)

= $6 million ÷ $20

= 300,000 units

hence, the accounting break-even level of annual sales is 300,000 units

We simply applied the above formula so that the correct value could come

And, the same is to be considered