Question: 5. During its first year operations, the Sub-ray Corporation produced the following income statement results. Net Sales $300,000 Cost of goods sold -180,000 Gross profit
5. During its first year operations, the Sub-ray Corporation produced the following income statement results.
Net Sales $300,000
Cost of goods sold -180,000
Gross profit 120,000
General and administration -60,000
marketing expenses -60,000
Depreciation -20,000
EBIT -20,000
Interest expenses -10,000
Earning before taxes -30,000
Income taxes -0
Net earning (loss) 30,000
Cost of goods SOLD ARE EXPECT TO VARY WITH SALES AND BE A CONSTANT PERCENTAGE OF SALES. the GENERAL AND ADMINISTRATIVE EMPLOYEES HAVE BEEN HIRE AND ARE EXPECTED TO REMAIN A FIXED COST. marketing EXPENSES ARE ALSO EXPECTED TO REMAIN FIXED BECAUSE THE CURRENT SALES STAFF MEMBERS ARE EXPECTED TO REMAIN ON FIXED SALARIES AND NO NEW HIRES PLANNED. THE EFFECTIVE TAX RATE IS EXPECTED TO BE 30 PERCENT FOR A PROFITABLE FIRM.
A. Estimate the survival or EBDAT breakdown amount in terms of survival revenues necessary for the Sub-Ray Cooperation to break even next year.
B. Assume that the product selling price is $50 per unit. Calculate the EBDAT break-even point in terms of the number of units that will have been-sold next year.
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