EBIT Sensitivity Stewart Industries sells its finished product for $ 8.66 per unit. Its fixed operating...

EBIT Sensitivity Stewart Industries sells its finished product for $ 8.66 per unit. Its fixed operating costs are $ 18 comma 800, and the variable operating cost per unit is $ 4.03. a. Calculate the firm's earnings before interest and taxes (EBIT) for sales of 9 comma 000 units. b. Calculate the firm's EBIT for sales of 7 comma 000 and 11 comma 000 units, respectively. c. Calculate the percentage changes in sales (from the 9 comma 000-unit base level) and associated percentage changes in EBIT for the shifts in sales indicated in part (b). d. On the basis of your findings in part (c), comment on the sensitivity of changes in EBIT in response to changes in sales.

a. The firm's earnings before interest and taxes is $ nothing. (Round to the nearest dollar.)

Expert Solution

b.Units	7,000	9,000	11,000
Contribution Margin i.e. Sales - variable costs	32,410	41,670	50,930
Less: Fixed costs	18,800	18,800	18,800
EBIT	13,610	22,870	32,130

% change in Sales	-22.22%		22.22%
% change in EBIT	-40.49%		40.49%
Sensitivity of EBIT	1.8220376	Times	1.8220376

jeff jeffy answered 1 year ago

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