The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production.

QUESTION

The
Spitfire Model Airplane Company has the following modified income statement
($000) at 100,000 units of production.
Revenue $10,000
Variable Cost 6,500
Fixed Cost 2,200
EBIT
$ 1,300
Interest (@ 10%) 500
EBT
$ 800
Tax (@ 40%) 320
EAT
$ 480
# shares 20,000

a.
What are Spitfire’s contribution margin and dollar breakeven point?
b.
Calculate Spitfire’s current DFL, DOL, and DTL.
c.
Calculate the current EPS and estimate what it would become if sales declined
by 25%. Use the DTL first and then
recalculate the modified income statement.
(Assume a negative EBT generates a negative tax.)

The
Spitfire Model Airplane Company has the following modified income statement
($000)

ANSWER:

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