A plant produces 300 units of an equipment a month of P3,600 each. A unit sells for P4.00. The company has 10,000 shares of stock at P200 par value whose annual dividend is 20%. The fixed cost of production is P120,000 a month. What is the break-even point? (a) (b) What is the"unhealthy point"? (c) (c) What is the profit or loss if production is 60% Of capacity? Ans.(a) 100 units/month, (b) 128 units/month (c) P62,667 per month 6.
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- Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?It is December 31. Last year, Campbell Construction had sales of $80,000,000, and it forecasts that next year’s sales will be $76,000,000. Its fixed costs have been—and are expected to continue to be—$40,000,000, and its variable cost ratio is 21.00%. Campbell’s capital structure consists of a $15 million bank loan, on which it pays an interest rate of 8%, and 750,000 shares of common equity. The company’s profits are taxed at a marginal rate of 40%. The following are the two principal equations that can be used to calculate a firm’s DFL value: DFL (at EBIT = $X)=Percentage Change in EPSPercentage Change in EBITDFL (at EBIT = $X)=Percentage Change in EPSPercentage Change in EBIT DFL (at EBIT = $X)=EBITEBIT−Interest−Preferred Dividends(1 – Tax Rate)DFL (at EBIT = $X)=EBITEBIT−Interest−Preferred Dividends(1 – Tax Rate) Given this infromation, complete the following sentences: • The company’s percentage change in EBIT is ______(-12.26%/ -16.34%/ -13.62%) . • The percentage change…During a slack period, a manufacturer can sell 3000 articles per month at a price of $1.20 each. A $200,000 investment is used which is depreciated over a 20-year life. An annual fixed cost of $20,000 myst be considered well as an annual maintenance cost of $10,000. The production cost is $1.10 per item. The manufacturer's tax rate is 45%. Should the factory shut down?
- National Foods, Inc., makes a packet of corn flour that wholesales for Rs. 60.00. Each has variable operating costs of Rs.35.00. Fixed operating costs are Rs. 500,000 per year. The firm pays Rs. 130,000 interest and preferred dividends of Rs.70,000 per year. At this point, the firm is selling 30,000 packets per year and is taxed at a rate of 40%. a. Calculate National Foods’s operating breakeven point. b. On the basis of the firm’s current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its EBIT and earnings available for common. c. Calculate the firm’s degree of operating leverage (DOL). d. Calculate the firm’s degree of financial leverage (DFL). e. Calculate the firm’s degree of total leverage (DTL). f. National Foods, Inc., has entered into a contract to produce and sell an additional 15,000 packets in the coming year. Use the DOL, DFL, and DTL to predict and calculate the changes in EBIT and earnings available for common. Check your work by a…Hong Sdn Bhd makes a patented rubber tapping machine that sells for RM6. Each machine has a variable operating cost of RM3. Fixed operating costs are RM60,000 per year and the company pays RM12,000 in interest and preferred dividend of RM6,000 per year. Currently, the company is selling 30,000 machines per year and is taxed at a rate of 40 %. d. Calculate the company’s degree of operating leverage ( DOL), degree of financial leverage ( DFL) and degree of total leverage ( DTL). Comment on your findingsCarolina Fastener Inc. makes a patented marine bulkhead latch that wholesales for $6.00. Each latch has variable operating costs of $3.50. Fixed operating costs are $50,000 per year. The firm pays $13,000 interest and preferred dividends of $7,000 per year. At this point, the firm is selling 30,000 latches per year and is taxed at a rate of 21%. Calculate Carolina Fastener’s operating breakeven point. On the basis of the firm’s current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its EBIT and earnings available for common. Calculate the firm’s degree of operating leverage (DOL). Calculate the firm’s degree of financial leverage (DFL). Calculate the firm’s degree of total leverage (DTL). Carolina Fastener has entered into a contract to produce and sell an additional 15,000 latches in the coming year. Use the DOL, DFL, and DTL to predict and calculate the changes in EBIT and earnings available for common. Check your work by a simple calculation…
- Hong Sdn Bhd makes a patented rubber tapping machine that sells for RM6. Each machine has a variable operating cost of RM3. Fixed operating costs are RM60,000 per year, and the company pays RM12,000 in interest and preferred dividend of RM6,000 per year. Currently, the company is selling 30,000 machines per year and is taxed at a rate of 40 %. What is the meaning of the term leverage? Discuss operating, financial and total leverage and the relationships among them. What is Hong Sdn Bhd’s operating breakeven point, EBIT and earnings available for ordinary shares? Calculate the company’s degree of operating leverage ( DOL), degree of financial leverage ( DFL) and degree of total leverage ( DTL). Comment on your findingsYor Inc. most recently sold 200,000 units at P12.00 each; its variable operating costs are P9.00 per unit, and its fixed operating costs are P400,000. Annual interest charges total P75,000, and the firm has 1,000 shares of P10 (annual dividend) preferred stock outstanding. It currently has 5,000 shares of common stock outstanding. Assume that the firm is subject to a 25% tax rate. Questions: At what level of sales (in units) would the firm break even on operations? (Round off final answer to the nearest peso) Calculate the firm’s earnings per share (EPS) in tabular form at the current level of sales. (Round off final answer to the nearest centavo or two decimal places) Calculate the firm’s earnings per share (EPS) in tabular form at a 220,000-unit sales level. (Round off final answer to the nearest centavo or two decimal places) Using the current P2,400,000 level of sales as a base, calculate the firm’s degree of operating leverage (DOL). (Round off final answer to the nearest two…A company is currently operating at a sales level (D) of only 1,250 units per year, with a selling price in pesos (p) given by p = 4200 – 2.50 per unit. The fixed cost of the company is P450,000 per year and the variable cost is P325 per unit. Is the company gaining or losing? It is being planned that the company will engage in a modernization plan that would increase the fixed cost by P85,000 per year, will lower the number of units sold per year by 10 units but would reduce the variable costs by P65 per unit. Would you agree with the plan?
- The books of V-cut Company shows that the business has a fixed cost of 20 million pesos annually. Its main product - Potato Chips has a revenue of PHP 250 per unit and PHP 100 variable cost. (a) Determine the breakeven quantity per year, and (b) Annual profit if 500000 units are sold.M&C Corp. consumes 300,000 units of spare part V per year. The average purchase lead time is 20 working days while the maximum is 27 working days. The company’s annual operations cover 240 days allowing for shutdowns for plant maintenance, holidays and Sundays. The company would like to keep safety stock or extra stock to guard against stock-outs. How much is the safety stock?Aruz Berhad sells its product at RM45 per unit. Fixed cost per year is RM220,000 while variable cost is RM15 per unit. The firm has debt capital of RM450,000 and its interest rate is 7%. Firm tax rate is 30% and the total number of shares issued is 300,000 units. You are required to: Calculate earnings before interest and tax (EBIT) and earnings per share (EPS) at total sales of 15,000 units. Calculate the degree of financial leverage at sales level of 15,000 units.
