Camping USA Inc. has been operating for only 2 years in the outskirts of Albuquerque, New Mexico, and is a new manufacturer of a top-of-the-line camping tent. You are starting an internship as assistant to the chief financial officer of the company, and the owner and CEO, Tom Charles, has decided that this is the right time to know more about the business and financial risks his company must deal with. For this, the CFO has asked you to prepare an analysis to support him in his next meeting with Tom Charles a week from today. To make the required calculations, you have put together the following data regarding the cost structure of the company in the popup window, The CFO has instructed you to first determine the break-even point in units of output for the company. He requires that you prepare supporting documents that demonstrate how you arrived at your conclusion and can facilitate his review of your work. Accordingly, you are required to have the information needed to prepare a pro forma income statement for the company to be presented to the CFO. In a format that is acceptable for a meeting discussion with the CEO, you also need to prepare answers to the following questions: a. What is the firm's break-even point in sales dollars? b. If sales should increase by 40 percent, by what percentage would EBT (earnings before taxes) and net income increase? c. Prepare another income statement, this time to verify the calculations from part b. X Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Output level Operating assets Operating asset turnover Return on operating assets Degree of operating leverage Interest expense Marginal tax rate 150,000 units $5,000,000 10 times 47% 9 times $620,000 21% Print Done a. Before you can compute the firm's break-even point in sales dollars, you need to compute some items on the firm's income statement. The firm's operating assets are $5,000,000 and the operating asset turnover is 10 times. What are the firm's sales revenues? $ (Round to the nearest dollar.) The firm's operating assets are $5,000,000 and the return on operating assets is 47%. What is the firm's EBIT? $ (Round to the nearest dollar.) Given the degree of operating leverage of 9 times the sales and EBIT computed in previous steps, what are the firm's total variable costs? $ (Round to the nearest dollar.) Based on the computed sales, EBIT, and variable costs, what are the firm's total fixed costs? $ (Round to the nearest dollar.) Compute the EBT, taxes, and net income to complete the following income statement. (Round up all items to the nearest dollar.) Sales revenues $ 50,000,000 Less: Variable costs 28,850,000 Less: Fixed costs 18,800,000 Equals: EBIT $ 2,350,000 Less: Interest expense 620,000 Equals: EBT Less: Taxes (21%) Equals: Net income What is the firm's break-even point in sales dollars? $(Round to the nearest dollar.)
