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75) At the accounting break-even point, Swiss Mountain Gear sells 22,940 ski masks at a price
of $19 each. At this level of production, the depreciation is $67,000 and the variable cost per unit
is $6. What is the amount of the fixed costs at this production level?
A) $231,220
B) $259,400
C) $161,330
D) $187,660
E) $145,600
76) The Metal Shop produces 1.7 million metal fasteners a year for industrial use. At this level of
production, its total fixed costs are $486,000 and its total costs are $791,000. The firm can
increase its production by 5 percent, without increasing either its total fixed costs or its variable
costs per unit. A customer has made a one-time offer for an additional 50,000 units at a price per
unit of $.165. Should the firm sell the additional units at the offered price? Why or why not?
A) Yes; The offered price is less than the marginal cost.
B) Yes; The offered price is equal to the marginal cost.
C) No; The offered price is less than the marginal cost.
D) Yes; The offered price is greater than the marginal cost.
E) No; The offered price is greater than the marginal cost.
77) Wexford Industrial Supply is considering a new project with estimated depreciation of
$38,200, fixed costs of $84,600, and total sales of $211,000 at the accounting break-even level.
The variable costs per unit are estimated at $9.64. What is the accounting break-even level of
production?
A) 6,871 units
B) 9,333 units
C) 10,415 units
D) 9,149 units
E) 7,248 units
78) The accounting break-even production quantity for a project is 18,311 units. The fixed costs
are $148,400 and the contribution margin per unit is $13.10. The fixed assets required for the
project will be depreciated on straight-line basis to zero over the project's 4-year life. What is the
amount of fixed assets required for this project?
A) $535,592
B) $365,896
C) $448,500
D) $332,400
E) $429,600
79) A project has an accounting break-even point of 7,264 units. The fixed costs are $164,800
and the projected variable cost per unit is $24.57. The project will require $398,000 for fixed
assets which will be depreciated straight-line to zero over the project's four-year life. What is the
projected sales price per unit?
A) $56.59
B) $58.18
C) $64.02
D) $76.67
E) $60.95
80) A proposed project has fixed costs of $39,480, depreciation expense of $8,724, and a sales
quantity of 1,330 units. The total variable costs are $5,607. What is the contribution margin per
unit if the projected level of sales is the accounting break-even point?
A) $37.81
B) $34.63
C) $36.24
D) $35.16
E) $38.13
81) A project has a unit price of $29.99, a variable cost per unit of $9.06, fixed costs of
$487,020, and depreciation expense of $38,009. Ignore taxes. What is the accounting break-even
quantity?
A) 28,269 units
B) 24,584 units
C) 29,306 units
D) 31,966 units
E) 25,085 units
82) A company is considering a project with a cash break-even point of 26,394 units. The selling
price is $19 a unit, the variable cost per unit is $7, and depreciation is $89,800. What is the
projected amount of fixed costs?
A) $374,512
B) $316,728
C) $356,108
D) $288,512
E) $291,064
83) The Motor Works is considering an expansion project with estimated fixed costs of
$127,000, depreciation of $16,900, variable costs per unit of $41.08, and an estimated sales price
of $79.90 per unit. How many units must the firm sell to break even on a cash basis?
A) 2,928 units
B) 3,272 units
C) 3,510 units
D) 4,206 units
E) 3,842 units
84) A project has an accounting break-even quantity of 28,700 units, a cash break-even quantity
of 17,120 units, a life of 10 years, fixed costs of $178,000, variable costs of $18.40 per unit, and
a required return of 14 percent. Depreciation is straight-line to zero over the project life. Ignoring
taxes, what is the financial break-even quantity?
A) 39,723 units
B) 39,201 units
C) 39,458 units
D) 39,624 units
E) 39,320 units
85) A project has a contribution margin per unit of $12.07, fixed costs of $67,840, depreciation
of $14,310, variable costs per unit of $14.09, and a financial break-even point of 15,624 units.
What is the operating cash flow at this level of output?
A) $0
B) $122,500
C) $102,309
D) $120,742
E) $117,673
86) You have determined that an OCF of $151,406 will result in a zero net present value for a
project, which is the minimum requirement for project acceptance. The fixed costs are $387,200
and the contribution margin per unit is $56.11. The company feels that it can realistically capture
8.5 percent of the 140,000 unit market for this product. The tax rate is 21 percent and the
required rate of return is 13 percent. Should the company develop the new product? Why or why
not?
A) Yes; The project's required rate of return exceeds the expected IRR.
B) Yes; The expected level of sales exceeds the required level of production.
C) No; The required level of production exceeds the expected level of sales.
D) No; The contribution margin is too high.
E) No; The OCF is too low.
87) Tucker's Trucking is considering a project with a discounted payback period just equal to the
project's life. The projections include a sales price of $39, variable costs per unit of $14, and
fixed costs of $238,000. The operating cash flow is $24,300. What is the break-even quantity?
A) 9,363 units
B) 11,211 units
C) 11,482 units
D) 12,301 units
E) 10,492 units
88) Cool Shades manufactures biotech sunglasses. The variable materials cost is $1.38 per unit,
and the variable labor cost is $.92 per unit. Suppose the firm incurs fixed costs of $348,000
during a year in which total production is 136,000 units and the selling price is $19.50 per unit.
What is the cash break-even point?
A) 16,453 units
B) 22,435 units
C) 20,233 units
D) 18,907 units
E) 14,768 units
89) Mountain Gear can manufacture mountain climbing shoes for $37.11 per pair in variable raw
material costs and $15.09 per pair in variable labor costs. The shoes sell for $99 per pair. Last
year, production was 248,000 pairs and fixed costs were $1.67 million. The maximum
production level for the firm given its current assets is 275,000 pairs. What is the minimum
acceptable total revenue the company should accept for a one-time order for an extra 12,000
pairs?
A) $611,418
B) $987,600
C) $626,400
D) $947,700
E) $564,100
90) Spencer Tools would like to offer a special product to its best customers. However, the firm
wants to limit its maximum potential loss on this product to the firm's initial investment. The
fixed costs are estimated at $27,400, the depreciation expense is $1,700, and the contribution
margin per unit is $6.75. What is the minimum number of units the firm should pre-sell to ensure
its potential loss does not exceed the desired level?
A) 3,220 units
B) 4,059 units
C) 2,815 units
D) 4,233 units
E) 4,658 units
91) The Coffee Express has computed its fixed costs to be $.27 for every cup of coffee it sells
given annual sales of 739,000 cups. The sales price is $.99 per cup while the variable cost per
cup is $.12. How many cups of coffee must it sell to break even on a cash basis?
A) 229,345
B) 146,472
C) 251,910
D) 167,630
E) 184,806
92) In an effort to capture the large jet market, Hiro Airplanes invested $11.264 billion
developing its B490, which is capable of carrying 840 passengers. The plane has a list price of
$276.5 million. In discussing the plane, Hiro Airplanes stated that the company would break
even when 253 B490s were sold. Assume the break-even sales figure given is the cash flow
break-even. Suppose the sales of the B490 last for only 12 years. How many airplanes must Hiro
sell per year to provide its shareholders a rate of return of 17 percent on this investment?
A) 50.17
B) 52.48
C) 50.72
D) 53.10
E) 54.40
93) You are in charge of a project that has a degree of operating leverage of 1.06. What will
happen to the operating cash flows if the number of units you sell increase by 3.7 percent?
A) 3.49 percent decrease
B) 4.76 percent decrease
C) 3.70 percent decrease
D) 3.69 percent increase
E) 3.92 percent increase
94) The accounting manager of Gateway Inns has noted that every time the inn's average
occupancy rate increases by 3.3 percent, the operating cash flow increases by 4.6 percent. What
is the degree of operating leverage if the contribution margin per unit is $47?
A) .72
B) .85
C) 1.75
D) 1.18
E) 1.39
95) Steele Insulators is analyzing a new type of insulation for interior walls. The initial fixed
asset requirement is $1.62 million, which would be depreciated straight-line to zero over the 7-
year life of the project. Projected fixed costs are $287,400 and the anticipated operating cash
flow is $136,300. What is the degree of operating leverage for this project?
A) 3.66
B) 1.92
C) 3.11
D) 2.27
E) 2.49
96) You are the manager of a project that has a degree of operating leverage of 1.84 and a
required return of 15 percent. Due to the current state of the economy, you expect unit sales to
decrease by 3.5 percent next year. What change should you expect in the operating cash flows
next year given your sales prediction?
A) 6.44 percent decrease
B) 4.50 percent decrease
C) 5.34 percent decrease
D) 6.44 percent increase
E) 5.34 percent increase
97) A project has an estimated sales price of $71 per unit, variable costs of $44.03 per unit, fixed
costs of $57,000, a required return of 14 percent, an initial investment of $79,500, no salvage
value, and a life of four years. Ignore taxes. What is the degree of operating leverage at the
financial break-even level of output?
A) 2.72
B) 3.09
C) 2.53
D) 3.03
E) 1.48
98) At an output level of 22,500 units, you calculate that the degree of operating leverage is 1.37.
What will be the percentage change in operating cash flow if the new output level is 25,000
units?
A) 17.78 percent
B) 16.17 percent
C) 15.22 percent
D) 17.73 percent
E) 15.08 percent
99) A proposed project has fixed costs of $42,106 per year. The operating cash flow at 12,000
units is $56,900. Ignore taxes. What will be the new degree of operating leverage if the number
of units sold rises to 12,600?
A) 1.46
B) 1.68
C) 1.57
D) 1.74
E) 1.82
