Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $120. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $211,000. The machinery costs $2.0 million and is depreciated straight-line over 10 years to a salvage value of zero. What is the accounting break-even level of sales in terms of number of diamonds sold? (Do not round intermediate calculations.) b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 21%, a 10-year project life, and a discount rate of 10%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Accounting break-even = (Annual Fixed costs + Annual Depreciation) / (Sales price – Variable cost…

Answered: Dime a Dozen Diamonds makes synthetic…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $120. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $211,000. The machinery costs $2.0 million and is depreciated straight-line over 10 years to a salvage value of zero.

What is the accounting break-even level of sales in terms of number of diamonds sold? (Do not round intermediate calculations.) b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 21%, a 10-year project life, and a discount rate of 10%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

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