Problem 1:
Surf Bicycles Inc. Will manufacture and sell 200,000 units next year. Fixed costs will total $500,000, and variable costs will be 60% of sales. The bicycles will sell for $200 each.
The firm wants to achieve a level of earnings before interest and taxes of $250,000. How many units must they sell to achieve that result?
Problem 2:
Alpha Electronics has the following income statement:
|
Sales
|
400,000
|
|
Total variable costs
|
240,000
|
|
Contribution margin
|
160,000
|
|
Fixed costs
|
140,000
|
|
EBIT
|
20,000
|
Calculate the new EBIT and percent change, assuming:
1. Sales increase by 20%
2. Sales decrease by 20%