Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Break-even analysis) Niece Equipment Rentals of Del Valle, Texas, has recently been approached about the prospect of purchasing a large construction crane. The crane rents

Break-even analysis) Niece Equipment Rentals of Del Valle, Texas, has recently been approached about the prospect of purchasing a large construction crane. The crane rents for $540 an hour but operator, fuel, insurance and miscellaneous expenses run $199 an hour when the crane is in use. The company owner estimates that it will cost $1,050 a month to store and maintain the crane and the annual depreciation expense is $54,000.

a. Calculate the accounting break-even number of annual rental hours needed to produce zero operating earnings from the crane (before taxes).

b. Calculate the cash break-even point. If we ignore non-cash expenses such as depreciation in the break-even calculation, how many hours must the crane be rented in order to break even on a cash basis?

c. Why do we have two different break-even points? What does each one tell you?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cornerstones Of Financial Accounting

Authors: Bertrand Piccard, Jay Rich, Jeff Jones, Maryanne Mowen, Don Hansen, Nick Jones

1st Edition

0324657730, 9780324657739

More Books

Students also viewed these Finance questions

Question

=+Could you create an interactive game on the website?

Answered: 1 week ago