(Break-even analysis) Niece Equipment Rentals of Del Valle, TX has recently been approached about the prospect of purchasing a large construction crane. The crane rents for $550 an hour but operator, fuel, insurance and miscellaneous expenses run $202 an hour when the crane is in use. The company owner estimates that it will cost $990 a month to store and maintain the crane and the annual depreciation expense is $53,000. 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? a. Calculate the accounting break-even number of annual rental hours needed to produce zero operating earnings from the crane (before taxes). The accounting break-even units of production is hours. 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? The cash break-even units of production is hours. e. Why do we have two different break-even points? What does each one tell you? The point tells us the level of sales necessary to cover our total fixed and variable operating costs where total fixed costs include both cash fixed costs and depreciation expense (which is not a cash expense for the period). The point tells us the level of sales where we have covered our cash fixed costs (ignoring depreciation) and as a result our cash flow is zero