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a. Calculate the accounting and cash break-even annual sales volume in units. b. Bill Mayborn is the grandson of the founder of the company and is currently enrolled in his junior year at the local state university. After reviewing the account calculation done in part a, Bill wondered if the depreciation expense should be included in the calculation. Bill had just completed his first finance class and was depreciation is not an actual out-of-pocket expense but rather an allocation of the cost of the printing equipment used in the business over its useful life. What d What can you learn from the cash and accounting break-even points?

a. Calculate the accounting and cash break-even annual sales volume in units. b. Bill Mayborn is the grandson of the founder of the company and is currently enrolled in his junior year at the local state university. After reviewing the account calculation done in part a, Bill wondered if the depreciation expense should be included in the calculation. Bill had just completed his first finance class and was depreciation is not an actual out-of-pocket expense but rather an allocation of the cost of the printing equipment used in the business over its useful life. What d What can you learn from the cash and accounting break-even points?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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(Related to Checkpoint 13.4) (Using break-even analysis) Mayborn Enterprises, LLC runs a number of sporting goods businesses and is currently analyzing a new T-shirt printing business. Specifically, the company is evaluating the feasibility of this business based on its estimates of the unit sales, price per unit, variable cost per unit, and fixed costs. The company's initial estimates of annual sales and other critical variables are shown here: a. Calculate the accounting and cash break-even annual sales volume in units. b. Bill Mayborn is the grandson of the founder of the company and is currently enrolled in his junior year at the local state university. After reviewing the accounting break-even calculation done in part a, Bill wondered if the depreciation expense should be included in the calculation. Bill had just completed his first finance class and was well aware that depreciation is not an actual out-of-pocket expense but rather an allocation of the cost of the printing equipment used in the business over its useful life. What do you think? What can you learn from the cash and accounting break-even points? a. The accounting break-even units of production is units. (Round to the nearest integer.) Data table Unit sales Price per unit Variable cost per unit Fixed cash expense per year Depreciation expense Base Case 7,400 $16.86 $10.65 $10,400 $3,600 X
Transcribed Image Text:(Related to Checkpoint 13.4) (Using break-even analysis) Mayborn Enterprises, LLC runs a number of sporting goods businesses and is currently analyzing a new T-shirt printing business. Specifically, the company is evaluating the feasibility of this business based on its estimates of the unit sales, price per unit, variable cost per unit, and fixed costs. The company's initial estimates of annual sales and other critical variables are shown here: a. Calculate the accounting and cash break-even annual sales volume in units. b. Bill Mayborn is the grandson of the founder of the company and is currently enrolled in his junior year at the local state university. After reviewing the accounting break-even calculation done in part a, Bill wondered if the depreciation expense should be included in the calculation. Bill had just completed his first finance class and was well aware that depreciation is not an actual out-of-pocket expense but rather an allocation of the cost of the printing equipment used in the business over its useful life. What do you think? What can you learn from the cash and accounting break-even points? a. The accounting break-even units of production is units. (Round to the nearest integer.) Data table Unit sales Price per unit Variable cost per unit Fixed cash expense per year Depreciation expense Base Case 7,400 $16.86 $10.65 $10,400 $3,600 X
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