To find the firm’s accounting break-even sales level in terms of units sold, we need to determine the point at which the firm’s revenue covers all of its fixed and variable costs, including depreciation.

Here's the step-by-step solution:

1. Calculate Annual Depreciation Expense

Since the initial capital investment of $2.2 million is depreciated straight-line over 6 years, the annual depreciation expense is: $\text{Annual Depreciation} = \frac{2,200,000}{6} = 366,666.67$

2. Determine Total Fixed Costs (Including Depreciation)

The fixed costs excluding depreciation are $531,000. Including depreciation, the total fixed costs are: $\text{Total Fixed Costs} = 531,000 + 366,666.67 = 897,666.67$

3. Contribution Margin per Unit

The contribution margin per unit is the difference between the sales price per unit and the variable cost per unit: $\text{Contribution Margin} = 1.80 - 1.40 = 0.40$

4. Calculate Break-Even Sales Level in Units

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit: $\text{Break-Even Sales Level (units)} = \frac{\text{Total Fixed Costs}}{\text{Contribution Margin}} = \frac{897,666.67}{0.40} = 2,244,167 \text{ units}$

Answer

Rounding to the nearest option, the correct answer is: b. 2.2 million

Would you like more details on any step or have further questions?

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Here are some related questions that might expand your understanding:

1. How would the break-even level change if the depreciation method changed?
2. What impact does a higher sales price have on the break-even point?
3. How would changes in variable costs affect the break-even units?
4. How do fixed costs affect the break-even point in other scenarios?
5. What are other methods to calculate depreciation and their impact on accounting?

Tip: Always remember, break-even analysis focuses on covering all fixed and variable costs. For accounting break-even, depreciation counts as a part of fixed costs.