A four year project costs $1.7 million and has straight-line depreciation. Sales of 190 units per year are projected, with a unit sales price of $18,000. Variable costs per unit are $11,200, and fixed costs are $410,000 per year. The required return is 12%, and the tax rate is 35%.
a. What is the cash break-even level of output (ignoring taxes)?
b. What is the accounting break-even level of output?
c. What is the degree of operating leverage at the accounting break-even point?