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 | ||||
jeff jeffy answered 1 year agoRelated Solutions
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No of units Fixed costs Total variable
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0 15,000 0 15,000
0
50 15,000 10,500
25,500 15,000
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36,000 30,000
150 15,000 31,500
46,500 45,000
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300 15,000 63,000
78,000 90,000
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AD Company estimates that variable costs will be 70% of sales and fixed costs will total...
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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.
Sales
Price per Unit
$16.50
Profit
$33,381.80
Number of
Customers
18,440
Total Fixed
Costs
$136,137.00
Contribution
Rate
?
3.
Variable Cost per Unit
$5.85
Sales Price per
Unit
$17.40
Fixed Costs
$164,065.60
Break Even Point
in Dollars
?
4.
Contribution Rate
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Sales Price per
Unit
$18.20
Fixed Costs
$219,423.16
Break-Even Point
in Number of Customers
?
5.
Sales
Price...
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