Question

Wexford Industrial Supply is considering a new project with estimated depreciation of $26,000, fixed costs of $79,000, and total sales of $187,000. The variable costs per unit are estimated at $11.80. What is the accounting break-even level of production?

Answer 1

Answer:

6949 units

Explanation:

Given:

Estimated depreciation of the new project = $26,000

Fixed cost = $79,000

Total sales = $187,000

Estimated variable costs per unit = $11.80

let the break-even production be 'n'

Now,

the break-even point is achieved when there is no profit no loss

thus,

Profit = 0

Also,

Profit = Total sales - Fixed cost - (Total variable cost) - Estimated depreciation

or

0 = $187,000 - $79,000 - ( $11.80 × n) - $26,000

or

11.80 × n = 82000

or

n = 6949.15 ≈ 6949 units