Sales 2300 460000 Variable expenses 1000 200000 Contribution margin 1300 260000

Sales 2300 460000 variable expenses 1000 200000

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Sales $ 23.00 $ 460,000 Variable expenses (10.00) (200,000) Contribution margin $ 13.00 260,000 Fixed costs (75,000) Earnings before interest and taxes (EBIT) 185,000 Interest expense (50,000) Earnings before tax (EBT) 135,000 a) What is the break even in units and sales dollars? Fixed costs 75,000 5,769 bottles of wine CM per unit $ 13.00 5,769 * $23.00 $ 132,692 in total sales dollars b) What is the break even in units and sales dollars if you also include interest expense as a fixed cost? Fixed costs 75,000 + 50,000 9,615 bottles of wine CM per unit $ 13.00 9,615 * $23.00 $ 221,154 in total sales dollars
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Calculate the Degree of Operating Leverage (DOL) CM 260,000 1.41 EBIT 185,000 c) Calculate the Degree of Financial Leverage (DFL) EBIT 185,000 1.37 EBT 135,000 d) Calculate the Degree of Combined Leverage (DCL) DOL * DFL 1.41 * 1.37 1.93 e) Assume Sales increase by 30%. Calculate the % change and $ change on EBIT and EBT. EBIT: 1.41 * 30% = 42% * (original EBIT $185,000) = $78,000 EBT: 1.93 * 30% = 58% * (original EBT $135,000) = $78,000 Proove
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Problem 3) Acme Co Trial Balance For the Year Ended December 31, 2019 Cash 24,000 Accounts receivable 110,000 Inventory 205,000 Property plant and equipment (net) 675,000 Long-term investments 150,000 Accounts payable 47,000 Taxes payable 12,000 Long-term debt 294,000 Common shares 10,000 Preferred shares 40,000 Retained earnings 461,000 Sales 1,420,000 Cost of goods sold 560,000 Depreciation expense 93,000 Salaries and wages 212,000 Selling expenses 95,000 Interest expense 60,000 Tax expense 100,000 Total 2,284,000 2,284,000 Note 1: Acme has 10,000 preferred shares outstanding that pay $1.50 per year and 40,000 common shares outstanding. Note 2: During the year, the company paid total dividends of $135,000 Calculate the following)
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a) Earnings Available to Common Shareholders OR Earnings after tax (EAT) – preferred dividends: b) Earnings per Share. = 285,000 / 40,000 = $7.125 c) Common dividends per share Common dividends Common shares outstanding Total dividends paid (given) $ 135,000 d) Dividend Payout Ratio Common dividend per share / Earnings per share = 3 / 7.125 = 42.10% e) Given that the market price for common shares is $18, the Price earnings (P/E) Ratio Market share price / earnings per share = 18 / 7.125 = 2.53X
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