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Chapter 2: 9BP (page 146)

Boise Timber Co. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are \(6,500,000, but 10 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is \)9. How many units does the firm need to sell to reach the cash break-even point?

Short Answer

Expert verified

The cash break even point of the company is 650,000 units.

Step by step solution

01

Depreciation

Depreciation=10%offixedcost=$6,500,000脳10%=$650,000

02

Cash break even point

Cashbreakevenpoint=Fixedcost-DepreciationRevenueperunit-Variablecostperunit=$6,500,000-$650,000$9=650,000units

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