Problemdime a dozen diamonds makes synthetic diamonds by, Ask an Expert

Accounting

Problem:

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 $50. The fixed costs incurred each year for factory upkeep and administrative expenses are $180,000. The machinery costs $1.3 million and is depreciated straight-line over 10 years to a salvage value of zero.

Required:

Question 1: What is the accounting break-even level of sales in terms of number of diamonds sold? Break-even sales is 6,200

Question 2: What is the NPV break-even level of sales assuming a tax rate of 30%, a 10-year project life, and a discount rate of 12%?

Note: Provide support for your underlying principle.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167993

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