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The Cullum ber Publications Textbook Company sells all of its books for $100 per book. and it currently costs $50 in variable costs to produce each text. The xed costs, which include depreciation and amortization for the rm, are currently $2 million per yea r. Management l5 considering changing the rm's production technology. which will increase the xed costs for the rm by 42 percent but decrease the 1variable costs per unit by 42 percent. It management expects to sell 45,000 books next year, should they switch technologies? [Roundansws tonearmtudmledollarg. 5.2?5J The currentEBleor therm is$ I . If the rm changes technology. the rm's new EB IT will be $ I . The rm should the new technologies. Blossom's Candles will be producing a new line of dripless candles in the coming years and has the choice of producing the candles in a large factory with a small number ofworkers or a small factory with a large number of workers. Ea ch candle will be sold for $10. If the large factory is chosen, the cost per unit to produce each candle will be $2.00. The cost per unit will be $100 in the small factory. The large factory would have xed cash costs of $1.5 million and a depreciation expense of $300,000 per year, while those expenses would be $530,000 and $100,000, respectively in the small factory. Calculate the number of candles for which the accounting operating prot at Blossom's Candles is the same regardless of the factory choice. {Rmrdanswer mm Minis units. 43.3. 152.} At l unit sales the two factories would yield the same accounting operating prot. Wildhorse Shoe Stores management forecasts that it will sell 1500 pairs of shoes nextyear. The rm buys its shoes for $50 per pair from the wholesaler and sells them for $75 per pair. If the rm will incur xed costs plus depreciation and amortization of $100,000.. then what is the percent increase in EBIT if the actual sales next year equal 8.900 pairs of shoes instead of 1500? Mamm' declnml palms. as. 15.25%.) EBITwiII increasehy l 95 Calculate the accounting operating profit break-even point and pretax operating cash flow break-even point for each of the three production choices outlined below. (Round answers to O decimal places, e.g. 125.) Choice Price Unit VC Cash FC D&A A $249 $159 $15,300 $1,800 B $50 $10 $1,400 $200 C $8 $1.60 $96 $128 Choice EBIT break-even Pretax operating cash flow break-even point A B CSheridan Light Bulbs management anticipates selling 3,000 light bulbs this year at a price of $17 per bulb. It costs Sheridan $9 in variable costs to produce each light bulb, and the fixed costs for the firm are $10,000. Sheridan has an opportunity to sell an additional 1,000 bulbs next year at the same price and variable cost, but by doing so the firm will incur an additional fixed cost of $3,000. Should Sheridan produce and sell the additional bulbs? (If an amount reduces the account balance then enter with negative sign, e.g. -125.) The additional sales would change Sheridan's EBIT by $ , and therefore Sheridan produceThe pretax operating cash ow of Pharoah Motors declined so much during the recession of 2003 and 2009 that the companyr almost defaulted on its debt. The owner of the companywants to change the cost structure of his business so that this does not happen again. He has been able to reduce xed costs from $520,000 to $309,000 and. in doing so, reduce the Cash Flow DOL for Pharoah Motors from 32 to 2'1 with sales of $1,050,000 and pretax operating cash flow of $220,000. If sales declined by 20 percent from this level. how much more pretax operating cash owwould Pharoah Mote rs have with the new cost structure than under the old? {Round mtonearatwhoiedaaneg 5,2?5J Pharoah Motors would have 1}: l more pretax operating cash ow with the new cost structure than under the The Sunla nd Co. is going to take on a project that is expected to increase its EBIT by $90,000, its xed coat cash expenditures by $153,000, and its depreciation and amortization by $80,000 next year. If the project vielda an additional 10 percent in revenue, what percentage increase in the project's EBIT will result from the additional revenue? Mam to 1 daclmalplace, :13. 15.2.] The percentage increase in pretax operating cash ow driven by the additional revenue will be I 96. Blossom's Candles will be producing a new line of dripless candles in the coming years and has the choice of producing the candles in a large factory with a small number of workers or a small factory with a large number of worke rs. Each candle will be sold for $10. If the large factory is chosen, the cost per unit to produce each candle will be $2.40. The cost per unit will be $6.60 in the small factory. The large factory would have fixed cash costs of $1.6 million and a depreciation expense of $300,000 per yea r, while those expenses would be $410,000 and $100,000, respectively in the small factory. Calculate the accounting ope rating prot break-even point for both factory choices for Blossom's Candles. [Rmmd MSW! to m whole unit; 3- 152.] The accounting break-even point for large factory is I units and for small factory is