Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: McGraw-Hill Education. 16th edition.Question #8:  Air Purifier Inc. computes its break-even point strictly on the basis of cash expenditures related to fixed costs.  Its total fixed costs are $2,450,000, but 15% of this value is represented by depreciation.  Its contribution margin (price minus variable costs) for each unit is $40.  How many units does the firm need to sell to reach the cash break-even point?

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Asked Apr 2, 2019
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Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: McGraw-Hill Education. 16th edition.

Question #8:  Air Purifier Inc. computes its break-even point strictly on the basis of cash expenditures related to fixed costs.  Its total fixed costs are $2,450,000, but 15% of this value is represented by depreciation.  Its contribution margin (price minus variable costs) for each unit is $40.  How many units does the firm need to sell to reach the cash break-even point?

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Step 1

Contribution margin (price minus variable costs) for each unit, CM =  $ 40.

Fixed cost, FC = $2,450,000

Depreciation, D = 15% x FC ...

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