We are evaluating a project that costs $739,600, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 80,000 units per year. Price per unit is $49, variable cost per unit is $34, and fixed costs are $735,000 per year. The tax rate is 23 percent, and we require a return of 9 percent on this project.
Required:
1. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e. g., 32.)
2. What is the degree of operating leverage at the accounting break-even point? (Do not round intermediate calculations and round your answer to 3 decimal places, e. g., 32.161.)

a) Break-even point (BEP)       =  49,000 units

b) Degree of operating leverage at the BEP

The accounting beak-even point the contribution would be exactly equal to the fixed cost. Hence, there wont be operating income. So we may not be define the operating leverage at the break-even point

 Explanation:

The break-even point is the level of sales that produces no profit or loss

It is the units to be sold to make total contribution  equal to total fixed cost.

BEP = Total fixed cost/ contribution per unit

      = 735,000 /(49-34)

      =  49,000 units

Degree of operation leverage(DOL) is calculated as follows;

DOL = contribution from sales/Net operating income

contribution per unit =  (49-34)= 15

Contribution from sale = 15 × 49,000= 735000

Net operation income =Contribution - Fixed cost

                                  = $735,000 - $735,000 = 0

At the accounting beak-even point the contribution would be exactly equal to the fixed cost. Hence, there wont be operating income. So we may not be define the operating leverage at the break-even point

answer; /// the above statement is (true);

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