Calculator Company Proposes to Invest $5 Million in a New

question 63

Multiple Choice

Calculator Company proposes to invest $5 million in a new calculator making plant. Fixed costs are $2 million a year. A calculator costs $5/unit to manufacture and can be sold for
$20/unit. If the plant lasts for 3 years and the cost of capital is 12%, what is the approximate break-even level (accounting) of annual sales? (Assume no taxes.) (approximately)

• A) $133,334 units
• B) $272,117 units
• C) $244,444 units
• D) None of the above

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Definitions:

Journalized

The process of recording transactions in a journal before they are posted to the general ledger in accounting.

Income Summary Account

A temporary account used in the closing process that aggregates all income and expense accounts to determine net income or loss for a period.

Permanent Account

An account in the general ledger that carries its ending balance over to the next accounting period, such as assets, liabilities, and equity accounts.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial condition at a specific time, summarizing its assets, liabilities, and shareholders' equity.