2.Meyer Appliance Company makes cooling fans. The firms income statement is as follows:

Sales ( 7,000 fans at $ 20) $ 140,000

Less: Variable costs(7,000 fans at $8) 56,000

Fixed Costs 44,000

EBIT 40,000

Less: Interest 10,000

Earnings Before Taxes 30,000

Less:Taxes (20%) 6,000

Net Income $ 24,000

a.Find the profit breakeven point in units .

b.Assume that there are no fixed operating costs of the company.What is the breakeven point?

c.What will be the percentage change in operating profit if sales decreases by 10%?

d.Find Degree of Financial Leverage(DFL) and Degree of Total Leverage.(DTL).

e.What is the margin of safety for the firm at 7000 units of production?

f. How will DOL change if the production falls to 4500 fans ? Why?

g. What will be the percentage change in earnings per share if sales drop to 4500 fans ( a 36% drop)? What does this imply? (14 Points)