Income statements for Mount Lewis Copy Centers for 2016 and 2017 appear below. Data are in thousands
Question:
Income statements for Mount Lewis Copy Centers for 2016 and 2017 appear below. Data are in thousands of dollars.
a. Compute and interpret the DOL, DFL, and DCL in 2016. Assume the components of the costs of goods sold (COGS) are all variable costs.
b. Compute and interpret the DOL, DFL, and DCL in 2017. Assume the components of the COGS are all variable costs.
c. Why did these numbers change between 2016 and 2017?
2016 2017 $21,000 10,500 3,000 2,100 Sales $20,000 10,000 2,500 Cost of goods sold Leases Depreciation EBIT 2,000 $5,500 $5,400 Interest 3,000 3,200 $2,200 EBT Taxes (30%) $2,500 750 660 Net income $1,750 $1,540
Step by Step Answer:
a DOL S VCS VC FC 20000 1000020000 10000 4500 182 A 1 percentage point change in sales will result i...View the full answer
Introduction to Finance Markets, Investments and Financial Management
ISBN: 978-1119398288
16th edition
Authors: Ronald W. Melicher, Edgar A. Norton
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
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