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BEP : depreciation and contribution margin.

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BEP problem involving two new concepts: (1) depreciation, and (2) contribution margin. Depreciation should be deducted from fixed costs when determining the BEP, and the term "contribution margin" is defined as price-variable cost.

Calloway Cab Company determines its break-even strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $400,000, but 20 percent of this value is represented by depreciation. Its contribution margin for each unit is $3.60. How many units does the firm need to sell to reach the break-even point?

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Solution Summary

Solution contains calculations of break-even point (BEP).

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Response:
Cash expenditure related to fixed cost =Fixed cost - ...

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