Trying to determine formulas/solutions for the following:
Output Level 120,000 units
Operating assets $6,000,000
Operating asset turnover 12 times
Return on operating assets 48%
Degree of operating leverage 10 times
interest expense $720,000
Tax rate 42%
a. What is the firm's break even point in sales dollars?
b. If sales should increase by 40%, by what percentage would Earning Before Taxes (EBT) and net income increase?
c. Prepare income statement to verify calcualtions from part b
Output Level 120,000 units
Operating assets $6,000,000
Operating asset turnover 12 times
Return on operating assets 48%
Degree of operating leverage 10 times
interest expense $720,000
Tax rate 42%
a. What is the firm's break even point in sales dollars?
b. If sales should increase by 40%, by what percentage would Earning Before Taxes (EBT) and net income increase?
c. Prepare income statement to verify calcualtions from part b