Question

Boise Timber Co. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $7,600,000, but 25 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $20. How many units does the firm need to sell to reach the cash break-even point? (Round your answer to the nearest whole number.)

Answer 1

Answer:

285,000 units

Explanation:

The computation of the cash break-even point of sales units is shown below:

Cash break-even point = (Fixed cost - depreciation) ÷ (contribution margin per unit)

where,

Fixed cost = $7,600,000

Depreciation = $7,600,000 × 0.25% = $1,900,000

And, the contribution margin per unit is $20

So, the cash break-even point of sales units is

= ($7,600,000 - $1,900,000) ÷ ($20)

= 285,000 units