Reference no: EM132286071

(Related to Checkpoint? 13.4) ?(Using break-even? analysis) Mayborn? Enterprises, LLC runs a number of sporting goods businesses and is currently analyzing a new? T-shirt printing business.? Specifically, the company is evaluating the feasibility of this business based on its estimates of the unit? sales, price per? unit, variable cost per? unit, and fixed costs. The? company's initial estimates of annual sales and other critical variables are shown? here:

Base Case

Unit sales 7,300

Price per unit $15.21

Variable cost per unit $10.95

Fixed cash expense per year $9,800

Depreciation expense $4,300

a. Calculate the accounting and cash? break-even annual sales volume in units.

b. Bill Mayborn is the grandson of the founder of the company and is currently enrolled in his junior year at the local state university. After reviewing the accounting? break-even calculation done in part a?, Bill wondered if the depreciation expense should be included in the calculation. Bill had just completed his first finance class and was well aware that depreciation is not an actual? out-of-pocket expense but rather an allocation of the cost of the printing equipment used in the business over its useful life. What do you? think? What can you learn from the cash and accounting? break-even points?

a. The accounting? break-even units of production is.  Round to the nearest? integer.)

The cash? break-even units of production is  Round to the nearest? integer.)

b. (The accounting break even or cash-break even )point tells us the level of sales necessary to cover our total fixed and variable operating costs where total fixed costs include both cash fixed costs and depreciation expense? (which is not a cash expense for the? period), while the

(The accounting break even or cash-break even) point tells us the level of sales where we have covered our cash fixed costs? (ignoring depreciation) and as a result our cash flow is zero. ?(Select from the? drop-down menus.)