a) Using the information provided and results obtained above, apply formula to compute
(i) Accounting Break-even
(ii) Cash break-even (ignoring taxes) quantity of sales.
Show Work and properly "label" results.
b) Bonus: Using the information provided and results obtained AND Excel's "Goal Seek" function, compute
(i) Cash break-even (NOT ignoring taxes) and
(ii) Financial break-even quantity of sales.
Record the results below. Remember to properly "label" them.
| GIVEN INFORMATION |
|
| According to best estimates: |
|
| Unit sales |
45,000 |
| Price per unit |
140 |
| Variable cost per unit |
125 |
| Fixed costs per year |
186,000 |
| Fixed Assets at the beginning |
640,000 |
| Changes in NWC |
0 |
| Project life (years) |
2 |
| Depreciation -years,method |
2 |
| Required return |
12% |
| Income tax rate |
40% |