Question

Use the information from the previous two problems. Calculate BWP’s breakeven point in units and dollars, with and without the purchase of the new machine.
Revenue ..............$10,000
Variable cost ............6,500
Fixed cost ..............2,200
EBIT $ ..............1,300
Interest (@ 10%) .............500
EBT $ ................800
Tax (@ 40%) ..............320
EAT $ ................480
Number of shares ...........20,000
a. What are Spitfire’s contribution margin and dollar breakeven point?
b. Calculate Spitfire’s current DFL, DOL, and DTL.
c. Calculate the current EPS and estimate what it would become if sales declined by 25%. Use the DTL first and then recalculate the modified income statement. (Assume a negative EBT generates a negative tax.)



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  • CreatedSeptember 13, 2012
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