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 s t 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.

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Answer 1

Question

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 1st 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.

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Outline of the case Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her business started to grow, she realized she would soon need to hire one or two people and that will need money to pay for their compensation. In other words, she could not grow her business without borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit rating so most finance companies want to charge her a high-interest rate. She finally finds a lender that will loan her the money at 12% compounded monthly. Discussion Question: 1. How much interest will Jessica have to pay to the lender? 2. If you were Jessica, will you lend money at a higher interest rate? Why? 3. What other options are available and what should she do, aside from borrowing money. 4. Assume Hernandez has successfully managed her business for several years. List five possible reasons she may still need to borrow from time to time.

A friend of yours just got a new credit card, they tell you it's the best deal they have ever seen. They bought over $1,000 worth of merchandise and tell you all they have to pay in the credit card minimum each month, which is $40. Based on what you have learned in this lesson what would you tell them? Explain to them the dangers of what they are doing.

Excited to buy her dream car, Molly rushes into her local Jeep dealership. Molly picks out a car, sits down at the financing desk, and hears the following, “Well we ran your credit history. You’ve got a really thin file just a years worth of student loan payments. The deal you saw was for ‘well- qualified buyers.’ The best deal we can offer you is 6.6% for 60 months. A little more bad news, the cash allowance is also based on credit history, so you don’t qualify for $500. That said, you’re excited about a keep and I want to see you driving one, so I can do $400 for you. How much total interest will Molly pay using this plan? How much will Molly’s monthly payment be using the Bankrate calculator in the screen shot below?

Answer 2

Question

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 1st 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.

Expert Solution & Answer

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Answer 3

Question

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 1st 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.

Expert Solution & Answer

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Answer 4

Question

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 1st 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.

Expert Solution & Answer

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Answer 5

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 1st 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.

Answer 6

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 1st 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.

Answer 7

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 1st 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.

Answer 8

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.

Answer 9

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.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 7 - Forecasting Risk What is forecasting risk? In...Ch. 7 - Sensitivity Analysis and Scenario Analysis What is...Ch. 7 - Prob. 3CQ Ch. 7 - Break-Even Point As a shareholder of a firm that...Ch. 7 - Prob. 5CQ Ch. 7 - Real Options Why does traditional NPV analysis...Ch. 7 - Real Options The Mango Republic has just...Ch. 7 - Prob. 8CQ Ch. 7 - Prob. 9CQ Ch. 7 - Project Analysis You are discussing a project...

Solution Summary: The author calculates the accounting break-even point by dividing the fixed production costs by the price per unit less the variable production cost.

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