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PROBLEMS 1. Miss Ellaneous Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each
PROBLEMS 1. Miss Ellaneous Bakery is considering the addition of a new line of pies to its product offerings. 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. Miss Ellaneous faces a marginal tax rate of 25%, will have interest expense associ- ated with this line of $3,500, and expects to sell about 4,500 pies in the first year. a. b. C. Create an income statement for the pie line's first year. Is the line expected to be profitable? Calculate the operating break-even point in both units and dollars. How many pies would Miss Ellaneous need to sell in order to achieve EBIT of $20,000? d. Use the Goal Seek tool to determine the selling price per pie that would allow Miss Ellaneous to break even in terms of its net income. e. Calculate the DOL, DFL, and DCL for the new pie line. 1 2 3 4 Sales Miss Ellaneous Bakery Projected Income Statement for Pie Line 5 Variable Costs 6 Fixed Costs 7 Earnings Before Interest and Taxes 8 Interest Expense 9 Earnings Before Taxes 10 Taxes 11 Net Income 12 13 Additional Data 14 Estimated Pie Sales in Units 15 Price per Pie 16 Variable Cost per Pie 17 Tax Rate 18 19 Operating Break-even Points 20 Units 21 Dollars 22 Problem Week 4 Assignment: Chapter 7 Problem #1 Assignment Requirement: You will complete most of your weekly assignments using Excel. These assignments will reference the concepts learned from your text, from your chapter PowerPoints, and other videos provided for you to view. Please be sure to review the chapter PowerPoints before beginning your assignments. Topic: Using the information provided in Chapter 7 Problem #1, complete parts "a" through "e" using the provided Excel template below. Chapter 7 Problem #1 Student Name Template.xls
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