Use this information and solve the given questions
 

 Required

1) What observations can you make about Earnings Before Interest and Taxes (), when sales volume is:

a. 0

b. Break-even (without calculating actual break-even sales volume, can you identify the range of sales within with Break-even would occur?)

c. 20,000

d. Greater than 20,000

2) Determine the volume that is operationally feasible.

3) At the operationally feasible volume, are the additional costs worth the risk?
 

Transcribed Image Text:

Sensitivity of EBIT to Operating Leverage $ 20,000 $ S A L E S (units) 25,000 (25,000) (12,750) (500) $13,000 $ 11,750 20,000 $24,000 $ 24,000 25,000 $35,000 $ 36,250 30,000 $46,000 $ 48,500 0 5,000 10,000 15,000 $ (20,000) $ $(9,000) $ $2,000 $ Sensitivity of EBIT to Operating Leverage $ 20,000 $ S A L E S (units) 25,000 (25,000) (12,750) (500) $13,000 $ 11,750 20,000 $24,000 $ 24,000 25,000 $35,000 $ 36,250 30,000 $46,000 $ 48,500 0 5,000 10,000 15,000 $ (20,000) $ $(9,000) $ $2,000 $