How do I do this question **Understanding Break-Even Analysis: A Case Study on Mayborn Enterprises, LLC****Introduction to Break-Even Analysis**Break-even analysis is a financial calculation used to determine the number of products or services a business needs to sell to cover its costs. This includes both fixed costs (costs that do not change regardless of the number of units produced) and variable costs (costs that fluctuate with production volume). Understanding break-even points helps businesses set sales targets and pricing strategies.**Case Study: Mayborn Enterprises, LLC**Mayborn Enterprises, LLC is analyzing the feasibility of a new T-shirt printing business by evaluating unit sales, price per unit, variable costs, and fixed costs. Here are the initial estimates of annual sales and other critical variables:**Data Table**- **Unit Sales:** 7,800 units- **Price per Unit:** $16.21- **Variable Cost per Unit:** $10.25- **Fixed Cash Expense per Year:** $10,300- **Depreciation Expense:** $3,700**Exercises**a. **Calculate the accounting and cash break-even annual sales volume in units.**b. **Discuss the impact of including depreciation in the break-even calculation.****Explanation and Approach**1. **Accounting Break-Even Point:** - This considers both fixed and variable costs and includes non-cash expenses like depreciation. - **Formula:** Break-even sales (units) = Fixed Cost (including Depreciation) / (Price per Unit - Variable Cost per Unit)2. **Cash Break-Even Point:** - This considers only cash expenses, excluding depreciation. - **Formula:** Break-even sales (units) = Fixed Cash Cost (excluding Depreciation) / (Price per Unit - Variable Cost per Unit)**Example Calculations**1. **Accounting Break-Even Calculation:** - Total Fixed Costs = Fixed Cash Expense + Depreciation Expense - Total Fixed Costs = $10,300 + $3,700 = $14,000 - Contribution Margin per Unit = Price per Unit - Variable Cost per Unit - Contribution Margin per Unit = $16.21 - $10.25 = $5.96 - Break-even Sales (units) = Total Fixed Costs / Contribution Margin per Unit - Break-even Sales (units) = $14,000 / $5.96 ≈ 2,348 units

The company is considering value for cost every time calculating profit. The analysis of units sold…

(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: E 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? Data Table Base Case 7,800 $16.21 Unit sales Price per unit Variable cost per unit $10.25 $10,300 $3,700 Fixed cash expense per year Depreciation expense (Click on the icon o in order to copy its contents into a spreadsheet.)

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 12PC