Cash break-even analysis for Gibson & Sons
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Gibson & Sons, an appliance manufacturer, computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $1,200,000, but 25 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $2.40. How many units does the firm need to sell to reach the cash break-even point?
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This solution is comprised of a detailed explanation and calculation to answer how many units does the firm need to sell to reach the cash break-even point.
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As the depreciation is noncash expense, which means that there would be no cash outflow, then the depreciation should be deducted ...
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