INCOME STATEMENT Hermann Industries is forecasting the following income statement: Sales $8,000,000 Operating costs excluding depr. & amort. 4,400,000 EBITDA $3,600,000 Depreciation & amortization 800,000 EBIT $2,800,000 Interest 600,000 EBT $2,200,000 Taxes (40%) 880,000 Net income $1,320,000 The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
INCOME STATEMENT Hermann Industries is forecasting the following income statement: Sales $8,000,000 Operating costs excluding depr. & amort. 4,400,000 EBITDA $3,600,000 Depreciation & amortization 800,000 EBIT $2,800,000 Interest 600,000 EBT $2,200,000 Taxes (40%) 880,000 Net income $1,320,000 The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
Chapter9: Responsibility Accounting And Decentralization
Section: Chapter Questions
Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...
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INCOME STATEMENT Hermann Industries is
Sales $8,000,000
Operating costs excluding depr. & amort. 4,400,000
EBITDA $3,600,000
EBIT $2,800,000
Interest 600,000
EBT $2,200,000
Taxes (40%) 880,000
Net income $1,320,000
The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume
that operating costs (excluding depreciation and amortization) are 55% of sales and that
depreciation and amortization and interest expenses will increase by 10%. The tax rate, which
is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
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