Question
Your buddy comes to you with a surefire way to make some quick money and help pay off your student loans. His idea is to
Your buddy comes to you with a surefire 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. Its funny! All we have to do is buy a used silk screen press for $5,400 and we are in business! Assume there are no fixed costs, and you depreciate the $5,400 in the first period. Taxes are 22 percent. a. What is the accounting break-even point in the first year if each shirt costs $4.30 to make and you can sell them for $9.80 apiece? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Now assume one year has passed and you have sold 4,800 shirts! You find out that the Dairy Farmers of America have copyrighted the got milk slogan and are requiring you to pay $14,000 to continue operations. You expect this craze will last for another three years and your discount rate is 12 percent. What is the financial break-even point for your enterprise now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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