Question
Question Year A Year B Sales $120,000 $150,000 CGS 80,000 90,000 GP 40,000 60,000 OPE 35,000 47,500 EBIT 5,000 12,500 Interest 4,000 4,000 EBT 1,000
Question
Year A Year B
Sales $120,000 $150,000
CGS 80,000 90,000
GP 40,000 60,000
OPE 35,000 47,500
EBIT 5,000 12,500
Interest 4,000 4,000
EBT 1,000 8,500
Tax(40%) 400 3,400
NI $ 600 $ 5,100
Let TC (total op. cost) = CGS + OPE (operating cost). Then TC = Fixed + v*Sales
Determine the parameters, fixed and v. [That is, estimate the underlying linear function]
TC $115,000 $137,500
Sales 120,000 150,000
Recast the year A I/S into the contribution margin [CM] format.
a.
25 marks
Suppose sales are expected to decline by 10% next year (Year A is the current year). What NOPAT should the company expect next year? What about NI?
b.
25 marks
Recast the year B I/S into the contribution margin [CM] format.
Suppose sales are expected to decline by 10% next year (Year B is the current year). What NOPAT should the company expect next year? What about NI?
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