Niece Equipment Rentals of Del Valle, Texas, has recently been approached about the prospect of purchasing a
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Niece Equipment Rentals of Del Valle, Texas, has recently been approached about the prospect of purchasing a large construction crane. The crane rents for $ an hour but operator, fuel, insurance and miscellaneous expenses run $ an hour when the crane is in use. The company owner estimates that it will cost $ a month to store and maintain the crane and the annual depreciation expense is $
aCalculate the accounting breakeven number of annual rental hours needed to produce zero operating earnings from the cranebefore taxes
bCalculate the cash breakeven point. If we ignore noncash expenses such as depreciation in the breakeven calculation, how many hours must the crane be rented in order to break even on a cash basis?
cWhy do we have two different breakeven points? What does each one tell you?
Related Book For
Financial Management Principles and Applications
ISBN: 978-0133423822
12th edition
Authors: Sheridan Titman, Arthur Keown, John Martin
Posted Date: