What is the cash break-even level of output for this project

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Reference no: EM13810535

Inc. is considering a new product. The proposal is as follows:

Project cost: $2,000,000

Project life: 5 yrs

Salvage value: zero

Depreciation: straight line to zero

Sales projection: 180 units per year

Price per unit: $20,000

Variable cost per unit will be: $12,400

Fixed costs per year: $490,000

Required return on the project: 10%

Relevant tax rate: 35%

Based on our past experience, the unit sales, variable costs and fixed cost projections are probably accurate to within plus or minus 10%

What is the cash break-even level of output for this project (ignoring taxes)?

What is the accounting break-even level of output for this project? What is the degree of operating leverage at the accounting break-even point? How do you interpret this number?

Reference no: EM13810535

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