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:

Range of Values

A set of values that includes the minimum and maximum values within a given dataset.

Cash Basis

An accounting method where revenues and expenses are recorded when they are actually received or paid out in cash.

IRR

The Internal Rate of Return is a financial measurement tool used to assess the profitability of prospective investments.

Accounting Basis

The method used to record financial transactions; common methods include cash basis and accrual basis accounting.