Question: The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue............. $10,000 Variable Cost ........... 6,500 Fixed Cost

The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production.

Revenue............. $10,000

Variable Cost ........... 6,500

Fixed Cost ............ 2,200

EBIT .............. $ 1,300

Interest (@ 10%) ............. 500

EBT .............. $ 800

Tax (@ 40%)............ 320

Net Income.............. $ 480

# 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.)

Step by Step Solution

★★★★★

3.34 Rating (160 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a P 10M100000 100 V 65M100000 65 C M PVP 10065100 35 S BE F C C ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

465-B-F-F-M (6323).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

Breakeven point and competitive contribution margin analysis Johnson Company and Smith Company are competing firms that offer limousine service from the Charlesburg airport. While Johnson pays most...

Information on four independent companies follows. Calculate the correct amount for each answer blank. Unless otherwise instructed, round all total dollar figures (e.g., sales, total contribution...

The following are miscellaneous transactions for Top Shoe Suppliers for March 2021: Date 1 7 13 14 15 Transaction Details The owner took shoes from the stock for personal use, selling price R 239.40...

The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue $14,000 Variable Cost 6,100 Fixed Cost 6600 EBIT $1,300 Interest(@10%)...

5: DOL, DFL, and DTL The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue $10,000 Variable Cost 6,500 Fixed Cost 2,200 EBIT $...

The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue $18,000 Variable Cost 5,500 Fixed Cost 11200 EBIT $1,300 Interest(@10%)...

The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue $16,000 Variable Cost 6,100 Fixed Cost 8600 EBIT $1,300 Interest(@10%)...

Problem 14-16 The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue $18,000 Variable Cost 5,500 Fixed Cost 11200 EBIT $1,300...

Problem 14-16 The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production. Revenue $16,000 Variable Cost 5,500 Fixed Cost 9200 EBIT $1,300...

On Monday, the meteorologist forecast a 10 percent chance of snow, so Samia wore her boots to work. On Friday, the meteorologist reported a 90 percent chance that it would not snow, so Samia did not...

The Corporate Fund began the year with a net asset value of $12.50. At the end of the year, its NAV was $12.10. The fund paid year-end distributions of income and capital gains of $1.50. What is the...

Which Gestalt principle is being applied in the following chart? Connection Enclosure Similarity Proximity

Gordon is currently developing his project's stakeholder management strategy. All enterprise environmental factors should be considered during this process. Which of the following enterprise...

Define mutual exclusivity and describe ways in which projects can be mutually exclusive.

Capital budgeting is based on the idea of identifying incremental cash flows, so overheads arent generally included. Does this practice create a problem for a firm which, over a long period of time,...

Relate the idea of cost of capital to the opportunity cost concept .Is the cost of capital the opportunity cost of project money?

months and will partially disrupt production. The firm has just completed a $50,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: to be 74% of...

Security F has an expected return of 10.50 percent and a standard deviation of 43.50 percent per year. Security G has an expected return of 15.50 percent and a standard deviation of 62.50 percent per...

Greater risk reduction can be achieved when security returns are A . high B . negatively correlated C . positively correlated D . uncorrelated