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Stewart Industries sells its finished product for $9 per unit. Its fixed operating costs are $20,000, and the variable operating

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Stewart Industries sells its finished product for $9 per unit. Its fixed operating costs are $20,000, and the variable operating cost per unit is $5.

a. Calculate the firm’s earnings before interest and taxes (EBIT) for sales of 10,000 units.

b. Calculate the firm’s EBIT for sales of 8,000 and 12,000 units, respectively.

c. Calculate the percentage changes in sales (from the 10,000-unit base level) and associated percentage changes in EBIT for the shifts in sales indicated in part b.

d. On the basis of your findings in part c, comment on the sensitivity of changes in EBIT in response to changes in sales.


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a and b 8 000 Units 10 000 Units 12 000 Units Sales 72 000 90 000 108 000 Less Variable cost…View the full answer


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Related Book For  answer-question
Principles Of Managerial Finance

Principles Of Managerial Finance

ISBN: 978-0136119463

13th Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

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Question Details
Chapter # 13
Section: Problems
Problem: 8
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Question Posted: March 05, 2012 03:42:02
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