The following relationships exist for Dellva Industries, a manufacturer of electronic components. Each unit of output is

Question:

The following relationships exist for Dellva Industries, a manufacturer of electronic components. Each unit of output is sold for $45; the fixed costs are $175,000, of which $110,000 are annual depreciation charges; variable costs are $20 per unit.

a. What is the firm’s gain or loss at sales of 5,000 units? Of 12,000 units?

b. What is the operating breakeven point?

c. Assume that Dellva is operating at a level of 4,000 units. Are creditors likely to seek the liquidation of the company if it is slow in paying its bills?

Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....