Question
In: Finance
Wandel Inc. has forecasted sales of $300,000. The firm's fixed operating costs total $75,000 and its...
Wandel Inc. has forecasted sales of $300,000. The firm's fixed operating costs total $75,000 and its variable operating costs are equal to 70% of this sales level. The company needs to pay $12,000 in interest each period. Its tax rate is 40% and it has 10,000 shares.
a) Compute the earnings before interest and taxes (EBIT) for a sales level of $300,000
b) Compute Earnings after taxes and compute the EPS for that sales level.
Solutions
Expert Solution
| a) | Earnings before interest and taxes (EBIT) | $ 15,000 | |||
| Working: | |||||
| Sales | a | $ 3,00,000 | |||
| Less:Operating costs | |||||
| -Variable | b=a*70% | $ 2,10,000 | |||
| -Fixed | $ 75,000 | ||||
| Earning Before Interest and Taxes(EBIT) | $ 15,000 | ||||
| b) | |||||
| Earnings after taxes | $ 1,800 | ||||
| EPS | $ 0.18 | ||||
| Working: | |||||
| Earning Before Interest and Taxes(EBIT) | $ 15,000 | ||||
| Less:Interest expense | $ 12,000 | ||||
| Earning before Taxes (EBT) | $ 3,000 | ||||
| Less:Tax Expense | $ 1,200 | ||||
| Earning After Tax | $ 1,800 | ||||
| ÷ Number of shares | 10,000 | ||||
| EPS | $ 0.18 | ||||
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0
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Sales Price per Unit $16.37 Total Fixed Costs $142,408.00 Total Unit Sales 19364 Total Profit $22,952.80...
Sales
Price per Unit
$16.37
Total Fixed
Costs
$142,408.00
Total Unit
Sales
19364
Total Profit
$22,952.80
Variable Rate
?
2.
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$16.50
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Number of
Customers
18,440
Total Fixed
Costs
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Contribution
Rate
?
3.
Variable Cost per Unit
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Unit
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?
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