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accounting Break Even Point - Problem 8-9 Dime a Dozen Diamo

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Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $30. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs $1 million a year and is depreciated straight line over 10 years to a salvage value of zero.

A. What is the accounting break-even level of sales in terms of number of diamonds sold?

B. What is the NPV break-even sales assuming a tax rate of 35%, a 10-year project life and a discount rate of 12%

See attached template 8-9

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Solution Summary

This problem shows how to calculate the accounting Break Even Point.

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See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks

Problem 8-9

In part a, enter the formula to calculate the break-even point. In part b, enter ...

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