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mpany has $2.5 million of sales today, SG&A costs of $2 million excluding depreciation, annual depreciation of $0.6 million, and a COGS of agement estimates that if there is a large growth in sales, then the increase of SG&A excluding depreciation will equal to 10% of sales incre ase of depreciation will equal to 5% of sales increment. ther income during this time. men what are the cash breakeven sales? $ men what are the book breakeven sales? $ ,000 ,000

mpany has $2.5 million of sales today, SG&A costs of $2 million excluding depreciation, annual depreciation of $0.6 million, and a COGS of agement estimates that if there is a large growth in sales, then the increase of SG&A excluding depreciation will equal to 10% of sales incre ase of depreciation will equal to 5% of sales increment. ther income during this time. men what are the cash breakeven sales? $ men what are the book breakeven sales? $ ,000 ,000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A company has $2.5 million of sales today, SG&A costs of $2 million excluding depreciation, annual depreciation of $0.6 million, and a COGS of 70%. Management estimates that if there is a large growth in sales, then the increase of SG&A excluding depreciation will equal to 10% of sales increment, and the increase of depreciation will equal to 5% of sales increment. No other income during this time. • Then what are the cash breakeven sales? $ • Then what are the book breakeven sales? $ ,000 ,000
Transcribed Image Text:A company has $2.5 million of sales today, SG&A costs of $2 million excluding depreciation, annual depreciation of $0.6 million, and a COGS of 70%. Management estimates that if there is a large growth in sales, then the increase of SG&A excluding depreciation will equal to 10% of sales increment, and the increase of depreciation will equal to 5% of sales increment. No other income during this time. • Then what are the cash breakeven sales? $ • Then what are the book breakeven sales? $ ,000 ,000
Polymerco, a North American manufacturer of specialty polymers, has the following highly condense income statement, given in the table below. Their current sales are to North American customers only. The president casually mentions that it would be nice to have more offshore sales to diversify the company. Polymerco Income Statement Gross sales Bad debt Net sales COGS Operating income Other income and interest on long-term debt Contribution margin CM(%) SG&A ◆ This year ($000) 26939 nil 26939 22,243 4696 17.4% 2,122 2574 -60 % Net income (a) if Polymerco's production is running at 84% capacity, what is the maximum discount in percentage that you can provide? Please keep one decimal in the blank. (Please count the two years' data as the historical performance which gives CM% in a given range, then what is the maximum discount in percentage that you can provide?) Maximum discount= 2514 Last year ($000) 24293 nil 24293 21,341 2952 12.2% 2,067 885 -50 835 % Please keep one decimal in the blank In this case, will you have a negative impact on the contribution margin ($) of the business? (b) if Polymerco's production is running at 100% capacity, how much percentage of discount can you provide without reducing the contribution margin?
Transcribed Image Text:Polymerco, a North American manufacturer of specialty polymers, has the following highly condense income statement, given in the table below. Their current sales are to North American customers only. The president casually mentions that it would be nice to have more offshore sales to diversify the company. Polymerco Income Statement Gross sales Bad debt Net sales COGS Operating income Other income and interest on long-term debt Contribution margin CM(%) SG&A ◆ This year ($000) 26939 nil 26939 22,243 4696 17.4% 2,122 2574 -60 % Net income (a) if Polymerco's production is running at 84% capacity, what is the maximum discount in percentage that you can provide? Please keep one decimal in the blank. (Please count the two years' data as the historical performance which gives CM% in a given range, then what is the maximum discount in percentage that you can provide?) Maximum discount= 2514 Last year ($000) 24293 nil 24293 21,341 2952 12.2% 2,067 885 -50 835 % Please keep one decimal in the blank In this case, will you have a negative impact on the contribution margin ($) of the business? (b) if Polymerco's production is running at 100% capacity, how much percentage of discount can you provide without reducing the contribution margin?
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