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What is the accounting break-even level of sales

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Question - Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $240. The materials cost for a synthetic diamond is $180. The fixed costs incurred each year for factory upkeep and administrative expenses are $2,300,000. The machinery costs $1.42 million and is depreciated straight-line over 10 years to a salvage value of zero.

Required -

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

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

Reference no: EM133107837

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