Chapter 7, Problem 20QAP

A

Summary Introduction

Adequate information:

The initial investment required is $\$7,200$ that is the cost of the press.

There are no fixed assets.

The tax rate is $21\%$ .

  $\$7,200$ is depreciated in the $1^{st}$ period.

The cost of the shirt is $\$3.20$ that can be sold for $\$15$ per piece.

To compute: Accounting Break-even point.

Introduction: By dividing the fixed production costs by the price per unit less the variable production costs, the breakeven point is determined in accounting. The production level at which a product's expenses and revenues are equal is known as the breakeven point.

B

Summary Introduction

Adequate information:

  $5,000$ shirts are sold in year $1$ .

The company has to pay $\$20,000$ to continue operations.

The discount rate is $12\%$ and sales will be such for $3$ years.

To compute: Financial break-even point.

Introduction: Numerous aspects of business and finance make use of breakeven points. It is the production level where total production revenue and total production costs are equal in accounting terms.