1. Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and fixed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. Ignoring taxes, what is the accounting break-even quantity?
a. 800
b. 880
c. 8,000
d. 8,800
e. 88,000
2. Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and fixed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. What is the cash break-even quantity?
a. 800
b. 880
c. 8,000
d. 8,800
e. 88,000