Question
During its first year of operations, the SubRay Corporation produced the following income statement results: Net Sales 300,000 COGS (180,000) Gross Profit 120,000 General &
During its first year of operations, the SubRay Corporation produced the following income statement results:
Net Sales 300,000
COGS (180,000)
Gross Profit 120,000
General & Admin (60,000)
Marketing Expense (60,000)
Depreciation (20,000)
EBIT (20,000)
Interest Expense (10,000)
Earnings before tax (30,000)
Income Taxes 0
Net Earnings (loss) (30,000)
COGS are expected to vary with sales and be a constant percentage of sales, The general and admin. employees have been hired and are expected to remain a fixed cost. Marketing expenses are also expected to remain fixed because the current sales staff members are expected to remain on fixed salaries and no new hires are planned. The effective tax rate is expected to be 30% for a profitable firm.
A.) Estimate the survival or EBDAT breakeven amount in terms of survival revenues necessary for the SubRay Corporation to break even next tear,
B.) Assume that the product selling price is $50 per unit. Calculate the EBDAT break-even point in terms of the number units that will have to be sold next year.
* please show how you arrive to the answer.
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