3.1. Gas Link Ltd extracts and sells LPG gas wholesalers and industrial businesses in 48kg gas...
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3.1. Gas Link Ltd extracts and sells LPG gas wholesalers and industrial businesses in 48kg gas cylinders. The current selling price per kg is R50, while variable costs in the extraction of and storage of LPG gas are R20 per kg. Variable selling and distribution costs of LPG have been determined to be R10 per kg. Fixed costs are R500 000 p.a., and Gas Link Ltd currently sells 1000, 48kg cylinders per annum. Gas Link Ltd has the following instruments in issues: R500 000 corporate bonds incurring an interest of 20% p.a. 10% R1 000 000 preference shares. Required: I. From the above information, calculate the break-even point of Gas Link Ltd in kg (or 48kg cylinders). Round off your answer to a whole number. (4marks) II. III. Calculate EBIT (earnings before interest and tax), and profit for the year of Gas Link Ltd from the above information. Calculate Gas Link's degree of operating leverage. (18 marks) (3 marks) 3.1. Gas Link Ltd extracts and sells LPG gas wholesalers and industrial businesses in 48kg gas cylinders. The current selling price per kg is R50, while variable costs in the extraction of and storage of LPG gas are R20 per kg. Variable selling and distribution costs of LPG have been determined to be R10 per kg. Fixed costs are R500 000 p.a., and Gas Link Ltd currently sells 1000, 48kg cylinders per annum. Gas Link Ltd has the following instruments in issues: R500 000 corporate bonds incurring an interest of 20% p.a. 10% R1 000 000 preference shares. Required: I. From the above information, calculate the break-even point of Gas Link Ltd in kg (or 48kg cylinders). Round off your answer to a whole number. (4marks) II. III. Calculate EBIT (earnings before interest and tax), and profit for the year of Gas Link Ltd from the above information. Calculate Gas Link's degree of operating leverage. (18 marks) (3 marks)
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