Question
Break-even calculations are most often concerned with the effect of a shortfall in sales, but they could equally well focus on any other component of
Break-even calculations are most often concerned with the effect of a shortfall in sales, but they could equally well focus on any other component of cash flow. Dog Days is considering a proposal to produce and market a caviar-flavored dog food. It will involve an initial investment of $90,000 that can be depreciated straight-line over 10 years. In each of years 1-10, the project is forecast to produce sales of $100,000, and to incur variable costs of 50% of sales and some fixed costs. The corporate tax rate is 30%, and the cost of capital is 10%. Calculate the economic and accounting break-even levels of fixed costs.
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