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Can someone please help me with the below questions? Sport Time Company (SPT) produces head covers for golf clubs. The company expects to generate a
Can someone please help me with the below questions?
Sport Time Company (SPT) produces head covers for golf clubs. The company expects to generate a profit next year. It anticipates the following for next year, 2021: Fixed manufacturing costs Fixed general & administrative expenses Variable manufacturing costs per unit of product Variable selling costs per unit Each unit of product will sell for $120,000 $80,000 $4.00 $2.00 $15.00 1) (a) Compute the breakeven point in sales units. (2 marks). (b) Compute the breakeven point in sales dollars. (2 marks). 2) How many head covers the company must sell to have $ 7,000 earnings before interest and taxes? (3 marks). Compute the revenue of the company in this case. (1 marks). 3) If the selling price is decreased to $14 per unit and fixed general and administrative expenses are cut by $33,000, what would the new breakeven point be in units and dollars? How many head covers must the company sell to have $ 6,000 earnings before interest and taxes in this case? Compute the revenue of the company in this case. (5 marks). 4) If SPT currently sells, 40,000 items per year compute the operating leverage, in the base case scenario and in the second scenario. Comment on your results (7 marks). 5) SPT has $3,000 in interest expenses. What is their financial leverage at 40,000 items per year? What is their combined leverage? In the base case scenario and in the second scenario. Comment on your results (10 marks). 6) Define the concept of Intemal Rate of Return (IRR) of an investment. In which cases is IRR unreliable as a capital budgeting technique? (10 marks)Step by Step Solution
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