Question

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. 16 ^{th} 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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