A proposed 1-year project has a contribution margin of $5, fixed costs of $12,000, variable costs per unit of $12, depreciation of $30,000, an EAC of $41,185 and a tax rate of 21 percent. What is the present value break-even point in units

6,642 units

Explanation:

Given that,

Contribution margin = $5,

Fixed costs = $12,000,

Variable costs per unit = $12,

Depreciation = $30,000

EAC = $41,185

Tax rate = 21 percent

Present value break-even point in units:

= {[EAC × (1 - Tax rate)] - (Depreciation × Tax rate)} ÷ [contribution margin × (1 - Tax rate)]

= {[$41,185 × (1 - 0.21)] - ($30,000 × 0.21)} ÷ [$5 × (1 - 0.21)]

= [32,536.15 - $6,300] ÷ $3.95

= $26,236.15 ÷ $3.95

= 6,642 units

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