Your buddy comes to you with a sure-fire way to make some quick money and help pay off your student loans. His idea is to sell T-shirts with the words “I get” on them. “You get it?” He says, “You see all those bumper stickers and T-shirts that say ‘got milk’ or ‘got surf.’ So this says, ‘I get.’ It’s funny! All we have to do is buy a used silk screen press for $8,900 and we are in business!” Assume there are no fixed costs and you depreciate the $8,900 in the first period. The tax rate is 21 percent.

a, What is the accounting break-even point if each shirt costs $3.75 to make and you can sell them for $16 apiece?

b. What is the financial break-even point for your enterprise now?