From the Information Below, Calculate the Accounting Break-Even Point

question 5

Multiple Choice

From the information below, calculate the accounting break-even point. Fixed costs are $2,000/year. (Initial investment is $2,000.)
Variable costs: $6/unit.
Depreciation: $250/year.
Price: $20/unit.
Discount rate: 10%.
Project life: 4 years.
Tax rate: 34%.

• A) 88 units/year.
• B) 161 units/year.
• C) 143 units/year.
• D) 100 units/year.

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Definitions:

Constant Cost

A situation where the cost of producing one additional unit of a good or service is the same, regardless of the volume produced.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.

Equilibrium Price

The price at which the quantity of goods supplied equals the quantity of goods demanded.

Constant Cost Industry

An industry in which the costs of production, including the prices of inputs, do not change as the total output of the industry changes.