Meyerson's Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each pie will sell for $15 and the variable cost per pie will be $9. Total Fixed operating costs are expected to be $20,000. Meyerson's faces a marginal tax rate of 35%, will have interest expense associated with this line of $3,000, and expects to sell about 4,000 pies in the first year.
a. Create an income statement for the pie line's first year. Is the line expected to be profitable?
b. Calculate the operating break-even point in both units and dollars.
c. How many pies would Meyerson's need to sell in order to achieve EBIT of $15,000?
d. Use the Goal Seek tool to determine the selling price per pie that would allow Meyerson's to break even in terms of its net income.
e. Calculate the DOL, DFL, and DCL for the new pie line.