Question

Use the following information to compute Fixed costs, Depreciation, and Operating Cash Flow: Price per unit 71.00 Variable cost per unit 52.75 Cash Break Even Quantity 7,500 units Accounting Break Even Quantity 9,800 units Financial Break Even Quantity 13,000 units Fixed costs ____________________ Depreciation ___________________ Operating Cash Flow _____________

Answer 1

Answer:

Fixed costs = $136,875

Depreciation = $41,975

Operating Cash Flow =  $237,250

Explanation:

The formula to compute the break even point in units is shown below:

= (Fixed expenses ) ÷ (Contribution margin per unit)  

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit  

= $71 - $52.75

= $18.25

So,  

7,500 units = Fixed cost  ÷ $18.25

So, the fixed cost = 7,500 units × $18.25 = $136,875

Accounting break even point = (Fixed expenses + Depreciation ) ÷ (Contribution margin per unit)  

9,800 units = $136,875 + depreciation ÷ $18.25 units

$178,850  = $136,875 + depreciation

so, the depreciation equal to

= $178,850 - $136,875

= $41,975

The computation of the operating cash flow is shown below:

Financial Break Even Quantity = Number of units × contribution margin per unit

= 13,000 units × $18.25

= $237,250