QUESTION 4

1. Jasper Auto Inc is going to invest in a new machine to produce Part A. The cost of the machine is $400,000. Part A will have variable cost per unit of $75.00 and the sales price per unit will be $140.00. Fixed costs will be $80,000. The machine is expected to have a life of eight years. Jasper Auto requires a return of 10% on their investments.

   Required:

   Ignoring the effect of taxes, calculate the following . Round all your answers to two decimal points.

   1. Accounting Break-even quantity (2 marks)
   2. Cash Break-even quantity (2 marks)
   3. Financial Break-even quantity (4 marks)
   4. Degree of operating leverage. (2 mark