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:

Nominal Annual Rate

The interest rate stated on a loan or financial product, not accounting for compounding or inflation over time.

Interest Payments

Periodic payments made to lenders or bondholders as compensation for lending their money.

Nominal Interest Rate

The stated interest rate of a bond or loan, not adjusted for inflation, representing the actual annual cost of borrowing.

Compounded Quarterly

The process where interest is calculated and added to the principal sum of an investment or loan on a quarterly basis.