Meyerson’s 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. Meyerson’s 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. Meyerson’s 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. 1. Under the first scenario, How many pies would Meyerson’s need to sell in order to achieve EBIT of $20,000? (EBIT = Earnings Before Interest and Taxes). 2.Under the second scenario, How many pies would Meyerson’s need to sell in order to achieve EBIT of $15,000? (EBIT = Earnings Before Interest and Taxes). 3. Use the Goal Seek tool to determine the selling price per pie that would allow Meyerson’s to break even in terms of its net income.
Meyerson’s 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. Meyerson’s 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. Meyerson’s 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.
1. Under the first scenario, How many pies would Meyerson’s need to sell in order to achieve EBIT of $20,000? (EBIT = Earnings Before Interest and Taxes).
2.Under the second scenario, How many pies would Meyerson’s need to sell in order to achieve EBIT of $15,000? (EBIT = Earnings Before Interest and Taxes).
3. Use the Goal Seek tool to determine the selling price per pie that would allow Meyerson’s to break even in terms of its net income.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
