Problem $7-20$ Break$-$Even Analysis

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.$\text{'}$ So this says, 'I get.$\text{'}$ It's funny! All we have to do is buy a used silk screen press for

$$8,500$ and we are in business!" Assume there are no fixed costs and you depreciate

the $$8,500$ in the first period. The tax rate is $23$ percent.

a$.$ What is the accounting break$-$even point if each shirt costs $$4\mathrm{.}10$ to make and you can

sell them for $$15\mathrm{.}65$ apiece? $($Do not round intermediate calculations and round your

answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ Now assume one year has passed and you have sold $7,200$ shirts! You find out that

the Dairy Farmers of America have copyrighted the "got milk" slogan and are

requiring you to pay $$26,500$ to continue operations. You expect this craze will last

for another $2$ years and that your discount rate is $11$ 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$.,32\mathrm{.}16.)$

Answer is complete but not entirely correct.