The Accounting Break-Even Production Quantity for a Project Is 5,425

question 16

Multiple Choice

The accounting break-even production quantity for a project is 5,425 units. The fixed costs are $31,600 and the contribution margin is $6. What is the projected depreciation expense?

• A) $700
• B) $950
• C) $1,025
• D) $1,053
• E) $1,100

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Definitions:

Depreciation Expense

A technique in accounting for distributing the expense of a physical asset across its usable life.

Fixed Costs

Expenses that do not change with the level of activity or output over a short period, such as rent, salaries, and insurance premiums.

Operating Leverage

A measure that evaluates the extent to which a firm can increase its profits by increasing sales, highlighting the fixed versus variable costs in operations.

Financial Break-Even

The point at which total revenues and total expenses are equal, resulting in neither profit nor loss.