A firm has fixed costs of 12 million and depreciation of 1 m

A firm has fixed costs of $1.2 million and depreciation of $1 million. At a sales level of $3.6 million, the variable costs of $2.304 million. What is the accounting break-even level of sales? a) 5.23 million b) 3.44 million c) 6.11 million d) 4.87 million

Solution

Break-even level of revenues=(depreciation+fixed costs)/(1-(variable costs/sales))

= (1.2+1)/(1-(2.304/3.6))=6.11 million