Respuesta :
A project with a unit sales price of $13.39, variable cost $5.48 per unit, fixed cost $3,000, and depreciation expense of $830. The accounting break-even quantity of a project is 485.
Break-even quantity or break-even point is the level of output where a company's production cost equal its revenue, hence gains neither profit or loss. Break-even point is calculaetd by dividing the fixed costs of production by the contribution margin. Break-even point could be formulated as:
Break-even point: Fixed costs
Contribution Margin
Contribution margin is the different between selling price and variable costs per unit produt. Hence, we could rewrite the break-even point formula into:
Break-even point: Fixed costs
Selling price - variable costs
From the case, we have some informations:
Selling price = $13.39 per unit
Variable cost = $5.48 per unit
Fixed costs = $3,000
Depreciation expense = $830
Using the informations provided above, we find that the break-even quantity for a project is:
Break-even point: Fixed costs
Selling price - variable cost
Break-even point: ($3,000 + $830)
($13.39 - $5.48)
Break-even point = 484.2 units
Break-even point ≈ 485 units
Take a look at the amount of fixed costs calculated above. We have to include the depreciation expense because it is also counted as a form of fixed costs.
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