Rita's Flowers Is Considering a 3-Year Project with a Discount

question 67

Multiple Choice

Rita's Flowers is considering a 3-year project with a discount rate of 12 percent,a tax rate of 34 percent,and an initial cost of $12,000 for fixed assets.The selling price is estimated at $22 a unit based on variable costs per unit of $6.20 and fixed costs of $2,280.Depreciation is straight-line to zero over 3 years.What is the accounting breakeven point?

• A)262 units
• B)301 units
• C)492 units
• D)397 units
• E)406 units

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Definitions:

Income Tax Rate

The proportion of income that is subject to taxation for a person or a company.

Consolidated Income Tax Return

A single income tax return filed for a group of related corporations, consolidating their tax liabilities.

Ownership

The state or fact of legal possession and control over property, which includes the rights to use, sell, or lease it.

Deferred Income Tax Asset

A tax asset that reflects a company's ability to reduce future tax liability due to deductible temporary differences.