A project requires an initial investment of $1,100,000 and is depreciated straight-line to zero salvage over its 10-year life. The project produces items that sell for $1,000 each, with variable costs of $600 per unit. Fixed costs are $400,000 per year.
a) What is the accounting break-even quantity, operating cash flow at accounting break-even, and DOL at that output level?
b) What is the cash flow break-even quantity?
c) What is the financial break-even quantity (suppose the required rate of return is 10%)? What is the DOL at the financial break-even quantity?