Eastern Motors Auto Dealership wanted to estimate the average CLV over a 5 year timehorizon of a customer who purchases a new vehicle. The average vehicle sells for $25,658and has a margin of 7%. Based on historical averages, 88% of people buying a new vehicleat Eastern will return for service 7 times over the next 5 years. Though it variesconsiderably, Eastern generates approximately $98 in margin on each service visit afteraccounting for parts and direct labor costs.Not including service, what is the average dollar margin for each new vehiclesold?

INTRODUCTION: The gross margin ratio, which compares a company's gross margin to its net sales,…

Answered: Eastern Motors Auto Dealership wanted…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A chip manufacturer makes video gaming chip that can be sold for $50. The chip material cost is $15 for each chip. The operations costs of the chip manufacturer (administration etc.) is $100000. The chip manufacturing machinery costs $500000 that is depreciated over 10 years to a salvage value of zero. a) What is the accounting breakeven level of sales in terms of number of chips sold? b) b. What is the NPV breakeven level of sales assuming a tax rate of 35%, 10-year project life and a discount rate of 12%.
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