Bс1Cash and book breakeven calculation exampleA company has $2.1 million of sales today, SG&A costs of $1.8 million excluding depreciation, annual depreciationof $0.9 million, and a COGS of 50% (and therefore a contribution margin of 50% or 0.5). Mamagement estimatesthat SG&A will increase from current levels at a rate of 20% of sales if there is a large growth in sales, half due toincreases in depreciation and half due to the increases in staff. Then what are the cash breakeven and book3 Contribution margin (%)250%50%50%4Incremental increase in SG&A(%), (1/2 is depreciation)5 Sales568195A$9 Sales10 COGS11 Contribution Margin$12 SG&A excluding depreciation $13 Depreciation$14 Operating income15 Other income16 Net income17 Operational cash flow$$$2,100 $Current Values ($00 Cash Breakeven ($00 Book Breakeven ($00 Comments2,100 seek goal$2,100 $2,100 $1,050 $1,050 $1,800 $900 $(1,650) $$(1,650) $(750) $$20%2,100 $1,050 $1,050 $1,800 $900 $(1,650) $$(1,650) $(750) $D20%2,100 variablesE1,050 COGS=Sales(1-CM (%))1,050 CM=Sales-COGS1,800 10% increase900 10% increase(1,650)| OI-CM-(SG&A+D)(1,650) NI=OI+Otherl(750) OCF=OI+D What is the level of sales ($) that will reach the exact cash break-even point?Answer:What is the level of sales ($) that will reach the exact book break-even point?Answer:

Answered: Image /qna-images/answer/28fcce3d-dcae-4098-b1fe-bb5a448a699a.jpg

B C 1 Cash and book breakeven calculation example 2 A company has $2.1 million of sales today, SG&A costs of $1.8 million excluding depreciation, annual depreciation of $0.9 million, and a COGS of 50% (and therefore a contribution margin of 50% or 0.5). Mamagement estimates that SG&A will increase from current levels at a rate of 20% of sales if there is a large growth in sales, half due to increases in depreciation and half due to the increases in staff. Then what are the cash breakeven and book 3 Contribution margin (%) 50% 50% 50% Incremental increase in SG&A 4 (%). (1/2 is depreciation) 567899 5 Sales 9 Sales A 10 COGS $ $ $ 12 SG&A excluding depreciation $ 13 Depreciation $ 11 Contribution Margin $ 14 Operating income 15 Other income 16 Net income 17 Operational cash flow $ $ Current Values ($00 Cash Breakeven ($00 Book Breakeven ($00 Comments 2.100 $ 2.100 $ $ 2,100 $ $ 1,050 $ 1,050 $ 1,800 $ 20% 2,100 $ 900 $ (1,650) $ $ (1,650) $ (750) $ 1,050 $ 1,050 $ 1,800 $ 900 $ (1,650) $ $ 20% 2,100 variables (1,650) $ (750) $ E 2,100 seek goal 1,050 |COGS=Sales(1-CM(%)) 1,050 CM=Sales-COGS 1,800 10% increase 900 10% increase (1,650) OI-CM-(SG&A+D) - (1,650)| NI=OI+Otherl (750) OCF=OI+D

B C 1 Cash and book breakeven calculation example 2 A company has $2.1 million of sales today, SG&A costs of $1.8 million excluding depreciation, annual depreciation of $0.9 million, and a COGS of 50% (and therefore a contribution margin of 50% or 0.5). Mamagement estimates that SG&A will increase from current levels at a rate of 20% of sales if there is a large growth in sales, half due to increases in depreciation and half due to the increases in staff. Then what are the cash breakeven and book 3 Contribution margin (%) 50% 50% 50% Incremental increase in SG&A 4 (%). (1/2 is depreciation) 567899 5 Sales 9 Sales A 10 COGS $ $ $ 12 SG&A excluding depreciation $ 13 Depreciation $ 11 Contribution Margin $ 14 Operating income 15 Other income 16 Net income 17 Operational cash flow $ $ Current Values ($00 Cash Breakeven ($00 Book Breakeven ($00 Comments 2.100 $ 2.100 $ $ 2,100 $ $ 1,050 $ 1,050 $ 1,800 $ 20% 2,100 $ 900 $ (1,650) $ $ (1,650) $ (750) $ 1,050 $ 1,050 $ 1,800 $ 900 $ (1,650) $ $ 20% 2,100 variables (1,650) $ (750) $ E 2,100 seek goal 1,050 |COGS=Sales(1-CM(%)) 1,050 CM=Sales-COGS 1,800 10% increase 900 10% increase (1,650) OI-CM-(SG&A+D) - (1,650)| NI=OI+Otherl (750) OCF=OI+D

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 102.2C

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