Question

Your buddy comes to you with a surefire way to make some quick money and help pay off your student loans. His idea is to sell T-shirts with the words "I get" on them. "You get it?" He says, "You see all those bumper stickers and T-shirts that say 'got milk' or 'got surf.' So this says, 'I get.' It's funny! All we have to do is buy a used silk screen press for $$\$ 5,600$$ and we are in business!' Assume there are no fixed costs, and you depreciate the $$\$ 5,600$$ in the first period. Taxes are 30 percent. What is the accounting break-even point if each shirt costs $$\$ 4.50$$ to make and you can sell them for $$\$ 10$$ apiece?

   Your buddy comes to you with a surefire way to make some quick money and help pay off your student loans. His idea is to sell T-shirts with the words "I get" on them. "You get it?" He says, "You see all those bumper stickers and T-shirts that say 'got milk' or 'got surf.' So this says, 'I get.' It's funny! All we have to do is buy a used silk screen press for $$\$ 5,600$$ and we are in business!' Assume there are no fixed costs, and you depreciate the $$\$ 5,600$$ in the first period. Taxes are 30 percent. What is the accounting break-even point if each shirt costs $$\$ 4.50$$ to make and you can sell them for $$\$ 10$$ apiece?


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Corporate Finance Canadian Edition
Corporate Finance Canadian Edition
& 4 more Prof… 8th Edition
Chapter 9, Problem 15 ↓

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Step 1

Contribution margin is the selling price per unit minus the variable cost per unit. In this case, the contribution margin is $10 - $4.50 = $5.50.  Show more…

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Your buddy comes to you with a surefire way to make some quick money and help pay off your student loans. His idea is to sell T-shirts with the words "I get" on them. "You get it?" He says, "You see all those bumper stickers and T-shirts that say 'got milk' or 'got surf.' So this says, 'I get.' It's funny! All we have to do is buy a used silk screen press for $$\$ 5,600$$ and we are in business!' Assume there are no fixed costs, and you depreciate the $$\$ 5,600$$ in the first period. Taxes are 30 percent. What is the accounting break-even point if each shirt costs $$\$ 4.50$$ to make and you can sell them for $$\$ 10$$ apiece?
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