Meyersons Bakery is considering the addition of a new line of pies to its product offerings.

However, the following scenarios could be faced by this Bakery for the new line:

First scenario: It is expected that each pie will sell for $17 and the variable costs per pie will be $11. Total fixed operating costs are expected to be $25,000. Meyersons faces a marginal tax rate of 25%, will have interest expense associated with this line of $3,500, and expects to sell about 4,500 pies in the first year.

Second scenario: It is expected that each pie will sell for $15 and the variable costs per pie will be $9. Total fixed operating costs are expected to be $20,000. Meyersons faces a marginal tax rate of 35%, will have interest expense associated with this line of $3,000, and expects to sell about 4,000 pies in the first year.

Required:

a. Create an income statement for the pie lines first year for both scenarios. Is the line expected to be profitable under which scenarios?

b. Calculate the operating break-even point in both units and dollars for each scenario.

c. Under the first scenario, How many pies would Meyersons need to sell in order to achieve EBIT of $20,000? (EBIT = Earnings Before Interest and Taxes).

d. Under the second scenario, How many pies would Meyersons need to sell in order to achieve EBIT of $15,000? (EBIT = Earnings Before Interest and Taxes).

e. Use the Goal Seek tool to determine the selling price per pie that would allow Meyersons to break even in terms of its net income.