Top Performance has been operating for several years in the outskirts of Ostersund, Sweden, and is a new manufacturer of a top-of-the-line outdoor jacket. You are starting an internship as assistant to the chief financial officer (CFO) of the company, and the owner and CEO, Anders Branstrom, has decided that this is the right time to know more about the business and financial risks his company must deal with. For this, the CFO has asked you to prepare an analysis to support him in his next meeting with Anders Branstrom a week from today.

To make the required calculations, you have put together the following data regarding the cost structure of the company.

The CFO has instructed you to first determine the break-even point in units of output for the company. He requires that you prepare supporting documents that will demonstrate how you arrived at your conclusion and can facilitate his review of your work. Accordingly, you are required to have the information needed to prepare an analytical income statement for the company to be presented to the CFO. In a format that is acceptable for a meeting discussion with the CEO, you also need to prepare answers to the following questions:

a. What is the firm’s break-even point in sales Swedish crowns (SEK)?

b. If sales should increase by 50 percent, by what percentage would EBT (earnings before taxes) and net income increase?

c. Prepare another income statement, this time to verify the calculations from part (b).

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Output level Operating assets Operating asset turnover Return on operating assets Degree of operating leverage Interest expense Tax rate 80,000 units SEK 8 times 38% 10 times SEK 500,000 28% 6,000,000