Firm A Firm B units Price Variable Cost Fixed Costs Interest Expense Tax Rate 140.00 units 850.00 Price 500.00 50.00 50.00 Variable Cost 45,000.00 1,000.00 Fixed Costs Interest Expense 12.00 12,000.00 1,000.00 0.30 Tax Rate 0.30 Sales 140 units at 850 dollars 119,000.00 Sales 500 units at 50 dollars 25,000.00 Less Variable Costs (50 at 140 units) 7,000.00 Less Variable Costs (12 at 500 units) 6,000.00 Fixed costs 45,000.00 Fixed costs 12,000.00 Earnings before interest and taxes (EBIT) 67,000.00 Earnings before interest and taxes (EBIT) 7,000.00 Interest expense 1,000.00 Interest expense 1,000.00 Earnings before taxes (EBT) 66,000.00 Earnings before taxes (EBT) 6,000.00 Income tax expense 19,800.00 Income tax expense 1,800.00 Earnings after taxes (EAT) 46,200.00 Earnings after taxes (EAT) 4,200.00