Please, use these formulas that are in the image only. 1. Meyer Appliance Company makes cooling fans. The firm's income statement is as follows:Sales (7,000 fans at $20)..$140,000Less: Variable costs (7,000 fans at $8)..56,000Fixed operating costs.44,000Earnings before interest and taxes (EBIT)$ 40,000Interest ( I)..10,000Earnings before taxes (EBT)$ 30,000Taxes (T).6,000Earnings after taxes (EAT).$ 24,000$ 6,000Preferred stock dividends (PD)Compute:a. The break-even point.b. Degree of operating leverage.c. Degree of financial leverage.d. Degree of total leverage. Using these formulas:1-Breakeven Point Formula:FCQ =p- vc2-Degree of Operating Leverage (DOL):Percentage change in EBITPercentage change in salesDOL3-The formula for calculating the degree of operatingleverage at a base sales level, Q, is the following:eX (P – vc)DOL(Q) = Qx (P –- vc) – FCQ: the sales level. P: sale price. vc: variable operating costs per unit.FC: fixed operating costs.4-The Degree Of Financial Leverage (DFL):Percentage change in EPSPercentage change in EBITDFLEBITDFL at base level EBIT =EBIT - I - (PD x5-degree of total leverage (DTL)Percentage change in EPSPercentage change in salesDTLex (P – vc)PDDTL at Q units =ex (P – vc) – FC – 1 –(2)

Break even refers to the situation of no profit and no loss. At the point of break even, business is…

Meyer Appliance Company makes cooling fans. The firm's income statement is as follows: Sales (7,000 fans at $20) $140,000 Less: Variable costs (7,000 fans at $8. 56,000 Fixed operating costs. Earnings before interest and taxes (EBIT) 44,000 $ 40,000 Interest ( I) . 10,000 $ 30,000 Earnings before taxes (EBT). Taxes (T) . 6,000 $ 24,000 $ 6,000 Earnings after taxes (EAT) Preferred stock dividends (PD) Compute: a. The break-even point. b. Degree of operating leverage. c. Degree of financial leverage. d. Degree of total leverage.

Meyer Appliance Company makes cooling fans. The firm's income statement is as follows: Sales (7,000 fans at $20) $140,000 Less: Variable costs (7,000 fans at $8. 56,000 Fixed operating costs. Earnings before interest and taxes (EBIT) 44,000 $ 40,000 Interest ( I) . 10,000 $ 30,000 Earnings before taxes (EBT). Taxes (T) . 6,000 $ 24,000 $ 6,000 Earnings after taxes (EAT) Preferred stock dividends (PD) Compute: a. The break-even point. b. Degree of operating leverage. c. Degree of financial leverage. d. Degree of total leverage.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 14EB: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are...

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