Business College

James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 6 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $594,000. The sales price per pair of shoes is $87, while the variable cost is $37. Fixed costs of $295,000 per year are attributed to the machine. The corporate tax rate is 22 percent and the appropriate discount rate is 10 percent.
What is the financial break-even point?

Answers

Answer 1

Answer:

James, Inc.

The financial break-even point in:

Sales unit = 8,322

Sales dollars = $724,014

Explanation:

a) Data and Calculations:

Cost of machine purchased = $594,000

Estimated economic life = 6 years

Salvage value = $0

Sales price per pair of shoes = $87

Variable cost per pair of shoes = 37

Contribution margin per pair = $50

Discounted contribution = $50 * 0.909 = $45.45

After-tax contribution = $35.45 ($45.45 * 0.78)

After-tax contribution margin ratio = $35.45/$87 * 100 = 41%

Fixed cost per year = $295,000

Corporate tax rate = 22%

Discount rate = 10%

Break-even point = Fixed cost/After-tax contribution

= $295,000/$35.45

= 8,322 units

= $724,014 ($87 * 8,322)

Related Questions

A fierce debate exists between policymakers as to whether or not they should use monetary and fiscal policies to stabilize small fluctuations in the economy. Please determine which of the given statements could be used to support using policy to stabilize the economy and which might be used against such choices. In favor of using policy Not in favor of using policy

Answers

Answer:

Hello the options related to your question is missing attached below are the missing options

answer :

In favor of using policy

Fiscal policy can be used to cut spending and rein in excessive aggregate demand. This controls inflationPolicy makers can expand the money supply in order to increase aggregate demand

Not in favor of using policy

Fiscal policy, in particular is subject to long delays in the political process, which can affect its usefulnessMonetary and fiscal policy only take effect after a long lagBecause of the imprecision of economic forecasting, policy makers may end up causing more harm to the economy than good

Explanation:

Fiscal policy is simply the use of government, taxing and spending policy to influence the economic conditions of the country positively over time. and it can come in either ways. i.e. increase in government spending or lowering taxes by the government

In favor of using policy

Fiscal policy can be used to cut spending and rein in excessive aggregate demand. This controls inflationPolicy makers can expand the money supply in order to increase aggregate demand

Not in favor of using policy

Tim, a single taxpayer, operates a business as a single-member LLC. In 2020, his LLC reports business income of $382,000 and business deductions of $668,500, resulting in a loss of $286,500. What are the implications of this business loss

Answers

Answer: See explanation

Explanation:

First, it should be noted that a threshold limit of $250,000 applies to the question according to IRS since Tim is a single taxpayer.

Therefore, the excess business loss will be:

= $286,500 - $250,000

= $36500

Therefore, Tim can use $250000 out of the loss of $286,500 to offset the non business income. Then, the excess business loss of $36500 will be treated as part of the NOL carryforward for Tim.

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