Explanation Potential venture to be assessed with all the discussion question, producing and selling of custom T-shirts venture can be taken. This venture will include all the component to analyze under each prescribed scenario as described under different indications. 1. Engaging in producing and selling custom T-shirts targeting all the age groups of the customer. The product will be launched in company’s own outlet first and then it will go to the different distributors in other cities. The venture will be on small scale first. The selling price for first five years is fixed at $10 increase every year estimating at $20, $30, $40, $50, & $60 respectively. Sales units to be produced and sold for first five years will be 150, 200, 210, 300, & 400 T-shirts. 2. Direct materials (cloth, strings, dyeing colors, etc.) & direct labor together will be $15, $20, $25, $30, & $35 per T-shirt for five years. 3. Equipment required for weaving, dyeing, & printings will amount to $20,000 with the estimated life of 10 years. 4. Factory rent will be $250 and utilities will amount to $100. Selling and administrative expenses will amount to $350 per year. 5. Direct materials and direct labor will be variable expenses whereas factory rent, utilities, and administrative and selling expenses will be fixed expenses. 6. Computing breakeven for first five years in units. Fixed expenses will be $700 whereas. Year 1: Computing contribution margin per unit: Contribution margin per unit = Selling price per unit - variable expenses per unit = $20 - $15 = $5 Computing required units to be sold to breakeven: Sales in units = Fixed expenses + operating income Contribution margin per unit = $ 700 + $0 $ 5 = 140 T-shirts Year 2: Computing contribution margin per unit: Contribution margin per unit = Selling price per unit - variable expenses per unit = $30 - $20 = $10 Computing required units to be sold to breakeven: Sales in units = Fixed expenses + operating income Contribution margin per unit = $ 700 + $0 $ 10 = 70 T-shirts Year 3: Computing contribution margin per unit: Contribution margin per unit = Selling price per unit - variable expenses per unit = $40 - $20 = $20 Computing required units to be sold to breakeven: Sales in units = Fixed expenses + operating income Contribution margin per unit = $ 700 + $0 $ 20 = 35 T-shirts Year 4: Computing contribution margin per unit: Contribution margin per unit = Selling price per unit - variable expenses per unit = $50 - $25 = $25 Computing required units to be sold to breakeven: Sales in units = Fixed expenses + operating income Contribution margin per unit = $ 700 + $0 $ 25 = 28 T-shirts Year 5: Computing contribution margin per unit: Contribution margin per unit = Selling price per unit - variable expenses per unit = $60 - $30 = $30 Computing required units to be sold to breakeven: Sales in units = Fixed expenses + operating income Contribution margin per unit = $ 700 + $0 $ 30 = 2 T-shirts (rounded) 7

Managerial Accounting, Introduction To Financial Accounting, Myaccountinglab With Etext And Access Card For Managerial Acct., Myaccountlab With Etext . For Intro To Financial Acct. (4th Edition)

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ISBN: 9780133934151

Author: Karen W. Braun

Publisher: PEARSON

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Chapter 7, Problem 7.70ACT

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To apply: The concept of cost-volume-profit analysis to the hypothecated potential venture.

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Chapter 7, Problem 7.69ACT

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Chapter 7 Solutions

Managerial Accounting, Introduction To Financial Accounting, Myaccountinglab With Etext And Access Card For Managerial Acct., Myaccountlab With Etext . For Intro To Financial Acct. (4th Edition)

Ch. 7 - Prob. 1QC Ch. 7 - Prob. 2QC Ch. 7 - Prob. 3QC Ch. 7 - Prob. 4QC Ch. 7 - Prob. 5QC Ch. 7 - Prob. 6QC Ch. 7 - Prob. 7QC Ch. 7 - Prob. 8QC Ch. 7 - Prob. 9QC Ch. 7 - Prob. 10QC

Ch. 7 - Prob. 7.1SE Ch. 7 - Prob. 7.2SE Ch. 7 - Prob. 7.3SE Ch. 7 - Prob. 7.4SE Ch. 7 - Prob. 7.5SE Ch. 7 - Prob. 7.7SE Ch. 7 - Prob. 7.8SE Ch. 7 - Prob. 7.9SE Ch. 7 - Prob. 7.10SE Ch. 7 - Prob. 7.11SE Ch. 7 - S7-12 Compute and use operating leverage factor...Ch. 7 - Prob. 7.6SE Ch. 7 - Prob. 7.13SE Ch. 7 - Prob. 7.14SE Ch. 7 - Prob. 7.15SE Ch. 7 - Prob. 7.16SE Ch. 7 - Prob. 7.17AE Ch. 7 - Prob. 7.18AE Ch. 7 - Prob. 7.19AE Ch. 7 - Prob. 7.20AE Ch. 7 - Prob. 7.21AE Ch. 7 - Prob. 7.22AE Ch. 7 - Prob. 7.23AE Ch. 7 - Prob. 7.24AE Ch. 7 - Prob. 7.25AE Ch. 7 - Prob. 7.26AE Ch. 7 - Prob. 7.27AE Ch. 7 - Prob. 7.28AE Ch. 7 - Prob. 7.29AE Ch. 7 - Prob. 7.30AE Ch. 7 - Prob. 7.31AE Ch. 7 - E7-32A Compute margin of safety and operating...Ch. 7 - Prob. 7.33AE Ch. 7 - Prob. 7.34AE Ch. 7 - Prob. 7.35AE Ch. 7 - Prob. 7.36AE Ch. 7 - E7-37 A Comprehensive CVP analysis (Learning...Ch. 7 - Prob. 7.38BE Ch. 7 - Prob. 7.39BE Ch. 7 - Prob. 7.40BE Ch. 7 - Prob. 7.41BE Ch. 7 - Prob. 7.42BE Ch. 7 - Prob. 7.43BE Ch. 7 - Prob. 7.44BE Ch. 7 - Prob. 7.45BE Ch. 7 - Prob. 7.46BE Ch. 7 - Prob. 7.47BE Ch. 7 - Prob. 7.48BE Ch. 7 - Prob. 7.49BE Ch. 7 - Prob. 7.50BE Ch. 7 - Prob. 7.51BE Ch. 7 - Prob. 7.52BE Ch. 7 - E7-53B Compute margin of safety and operating...Ch. 7 - Prob. 7.54BE Ch. 7 - Prob. 7.55BE Ch. 7 - Prob. 7.56BE Ch. 7 - Prob. 7.57BE Ch. 7 - Prob. 7.58BE Ch. 7 - Prob. 7.59AP Ch. 7 - Prob. 7.60AP Ch. 7 - Prob. 7.61AP Ch. 7 - Prob. 7.62AP Ch. 7 - Prob. 7.63AP Ch. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.65BP Ch. 7 - Prob. 7.66BP Ch. 7 - Prob. 7.67BP Ch. 7 - Prob. 7.68BP Ch. 7 - Discussion Questions 1. Define breakeven point....Ch. 7 - Prob. 7.70ACT Ch. 7 - Prob. 7.71ACT Ch. 7 - Prob. 7.72ACT

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