16. 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 Number of 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.)