Question

​(​Break-even analysis​) You have developed the income statement

Sales   51,100,865
Variable costs   (24,569,000)
Revenue before fixed costs   26,531,865
Fixed costs   (14,254,000)
EBIT   12,277,865
Interest expense   (1,054,688)
Earnings before taxes   11,223,177
Taxes at 22%   (2,469,099)
Net income   ˜NI

for the Hugo Boss Corporation. It represents the most recent​ year's operations, which ended yesterday. Your supervisor in the​ controller's office has just handed you a memorandum asking for written responses to the following​ questions:

a. What is the​ firm's break-even point in sales​ dollars?

b. If sales should increase by 40 ​percent, by what percent would earnings before taxes​ (and net​ income) increase?

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I HAVE EXPLAINED ANSWER 2 BY 2 METHODS, BOTH METHODS ARE APPROPRIATE. YOU FOLLOW WHICH YOU HAVE STUDIED

ACCOUNTS latest - Microsoft Excel (Product Activation Failed) Page Layout Formulas File Home Insert Data Review View Add-Ins Z AutoSum Cut A A Wrap Text Calibri 11 General Copy Fill Merge & Center Conditional Format Formatting as Table Styles Insert Delete Format Paste в IU* 000 Cell Sort & Find & % Format Painter Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing fox FY573 EN FO EP FQ FR ES FT FU EV FW FX FY FZ 558 559 FIXED COSTS/(1- VC/SALES) 14254000/(1-(24569000/51100865) BREAKEVEN POINT IN SALES DOLLARS = 560 BREAKEVEN POINT IN SALES DOLLARS = 561 ANS 1 BREAKEVEN POINT IN SALES DOLLARS = 27453468.87 562 40% INCREASE 563 МЕТHOD 2 DEGREE OF COMBINED LEVERAGE/TOTAL LEVERAGE SALES DCL= 564 51100865 71541211 CONTRIBUTION/EBT OR NET INCOME 34396600 565 VARIABLE COSTS 24569000 DCL 2.3640 [26531865/11223177] 566 CONTRIBUTION 26531865 37144611 DCL FIXED COSTS 14254000 567 14254000 22890611 IF SALES INCREASES BY 40% 568 EBIT 12277865 1054688 1054688 EBT WILL INCREASE BY = 40% X 2.3640 94.56% 569 INTEREST 21835923 NET INCOME WILL INCREASE BY = 40% X 2.3640 94.56% 570 ЕВT 11223177 571 ТАX 2469099 4803903 8754078 572 NET INCOME 17032020 573 ANS 2 МЕТНOD 1 % INCREASE IN EBT (21835923 - 11223177)/11223177*100 574 94.56% % INCREASE IN EBT = 575 % INCREASE IN NET INCOME = (17032020-8754078)/8754078*100 576 BOTH METHOD WILL GIVE SAME ANSWER % INCREASE IN NET INCOME = 94.56% 577 578 45 days DIFF ANALYSIS ove budget VARIANCE ВЕР, OL FL float B-S profit loss cycle FIFO CASH BUDGET ROE, BV MV ratio ratios DETROIT SALES BUDGET dupont 120 % Re erences WA 11:04 TENG 22-11-2019