# tutorial 2.pdf

29 de May de 2023
1 de 3

### tutorial 2.pdf

• 1. Tutorial 2 1) The break-even quantity of output is that quantity of output, in units, that results in an EBIT equal to zero. 2) The break-even point is equal to A) fixed costs divided by (sales price per unit - variable cost per unit). B) fixed costs divided by unit variable costs. C) fixed costs divided by selling price per unit. D) (sales price per unit - variable cost per unit) times the fixed costs. 3) HomeCraft makes wooden play sets. The company pays annual rent of \$400,000 per year and pays administrative salaries totaling \$150,000 per year. Each play set requires \$400 of wood, ten hours of labor at \$70 per hour, and variable overhead costs of \$100. Fixed advertising expenses equal \$100,000 per year. Each play set sells for \$3,200. What is HomeCraft's break-even output level? A) 340 play sets B) 325 play sets C) 297 play sets D) 258 play sets
• 2. 4) Based on the data contained in Table A, what is the break-even point in units produced and sold? TABLE A Average selling price per unit \$18.00 Variable cost per unit \$13.00 Units sold 400,000 Fixed costs \$650,000 Interest expense \$50,000 A) 130,000 B) 140,000 C) 150,000 D) 180,000 5) Based on the data contained in Table A, what is the break-even point in sales dollars? A) \$2,340,000 B) \$1,850,000 C) \$1,775,500 D) \$2,520,000 1 2 3 4 5 T A B B D 1) Voellers Upholstery Co. produces inexpensive leather chairs. The average selling price for one of the chairs is \$400. The variable cost per chair is \$250. Voellers has average fixed costs per year of \$450,000.
• 3. a. What is the break-even point in units? b. What is the break-even point in dollar sales? c. What would be the operating profit or loss associated with the production and sale of (1) 3,000 chairs, (2) 4,000 chairs? 2 ABC Corp. has estimated the following income statement for its next fiscal year. Sales \$20,000,000 Variable costs 6,000,000 Revenue before fixed costs 14,000,000 Fixed costs 9,000,000 EBIT 5,000,000 Interest expense 900,000 Earnings before taxes 4,100,000 Taxes (35%) 1,435,000 Net income \$2,665,000 3) Techno Robots produces a functioning toy robot. At a production and sales level of 10,000 robots, the firm has the following information: What is the break-even point in units for the firm? Suppose a Corporation has decided in favor of a capital restructuring that involves increasing its existing \$5 million in debt to \$25 million. The interest rate on the debt is 12 percent and is not expected to change. The firm currently has 1 million shares outstanding, and the price per share is \$40. If the restructuring is expected to increase the ROE, what is the minimum level for EBIT that GNR’s management must be expecting? Ignore taxes in your answer.