OceanGate sells external hard drives for $184 each. Its total fixed costs are $27 million, and its variable costs per unit are $120. The corporate tax rate is 40%. If the economy is strong, the firm will sell 8 million drives, but if there is a recession, it will sell only half as many. a. What will be the percentage decline in sales if the economy enters a recession? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Percentage decline in sales 50.00 % b. What will be the percentage decline in profits if the economy enters a recession? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. decline in mrefEt 50.700

OceanGate sells external hard drives for $184 each. Its total fixed costs are $27 million, and its variable costs per unit are $120. The corporate tax rate is 40%. If the economy is strong, the firm will sell 8 million drives, but if there is a recession, it will sell only half as many. a. What will be the percentage decline in sales if the economy enters a recession? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Percentage decline in sales 50.00 % b. What will be the percentage decline in profits if the economy enters a recession? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. decline in mrefEt 50.700

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Please
Important: EXCEL Spreadsheet Must be Used for this Problem. Per your request, Table 14-1 is included as an attachment. The Hurricane Lamp Company forecasts that next year’s sales will be $6 million. Fixed operating costs are estimated to be $800,000, and the variable cost ratio (that is, variable costs as a fraction of sales) is estimated to be 0.75. The firm has a $600,000 loan at 10 percent interest. It has 20,000 shares of $3 preferred stock and 60,000 shares of common stock outstanding. Hurricane Lamp is in the 40 percent corporate income tax bracket. a) Forecast Hurricane Lamp’s earnings per share (EPS) for next year. Develop a complete income statement using the revised format illustrated in Table 14.1. Then determine what Hurricane Lamp’s EPS would be if sales were 10 percent above the projected $6 million level. Answer: EPS (Sales = $6 million) = $5.40 b) Calculate Hurricane Lamp’s degree of operating leverage (DOL) at a sales level of $6 million using the following: The…
Ignore income taxes for this problem. A firm currently sells 25 units for $12 each. Its variable cost per unit is $9 and fixed costs total $60. The firm determines it can sell 35 units if it decreases the selling price from $12 to $11 per unit. The firm should Select one: a. Decrease the sales price because it will increase profits by $5. b. Not decrease the sales price because it will decrease profits by $10. c. Not decrease the sales price because it will decrease profits by $5. d. Decrease the sales price because it will increase profits by $10.
The Warren Watch Company sells watches for $26, fixed costs are $150,000, and variable costs are $15 per watch. What is the firm's gain or loss at sales of 8,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.$ What is the firm's gain or loss at sales of 16,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.$ What is the break-even point (unit sales)? Round your answer to the nearest whole number.units What would happen to the break-even point if the selling price was raised to $31? What would happen to the break-even point if the selling price was raised to $31 but variable costs rose to $21 a unit? Round your answer to the nearest whole number.
Cooper Industries wants to replace two small delivery trucks with one larger delivery truck. The old trucks are valued at $13,000 each. The new truck will cost $52,000. If Cooper’s controllable margin is $97,000 and their operating assets were valued at $580,000 before they bought the new truck, what will their new ROI be? A :17.5% B : 16.0% C : 15.3% D : 16.7%
I need help with this problem
Heat Inc. sells computer hard drives, and the market is competitive (i.e., sales price will not be affected by Heat's sales volume). Its EBIT for 2022 was $69,000 when the sales quantity was 500 units. In 2023, its EBIT was $119,000 when the sales quantity was 700 units. a) Calculate its contribution margin per unit and total fixed costs. b) Calculate the degree of operating leverage for 2022 and 2023. c) If Heat changes its production technology by doubling its fixed costs and the breakeven (indifferent) quantity is 1, 120 units, find the new contribution margin. Heat has $40,000 debt that pays annual interest of 15% and 2,000 outstanding common shares that are trading at $25. Its tax rate is 30% . d) Calculate EPS for 2022 and 2023. e) Calculate the degree of financial leverage for 2022 and 2023. f) Calculate the degree of total leverage for 2022 and 2023. g) Heat considers borrowing $20,000 new debts (that also pay 15% interest) to buy back common shares (at current price of $25 per…
Suppose Starbucks consumes 100 million pounds of coffee beans per year. As the price of coffee rises, Starbucks expects to pass along 60% of the cost to its customers through higher prices per cup of coffee. To hedge its profits from fluctuations in coffee prices, Starbucks should lock in the price of how many million pounds of coffee beans using supply contracts? Starbucks should lock in the price of million pounds of coffee beans. (Round to the nearest integer.)
?
Two firms, A and B, both produce brushes. The price of brushes is $1.60 each. Firm A has total fixed costs of $458,000 and variable costs of 48 cents per brush. Firm B has total fixed costs of $260,000 and variable costs of 72 cents per brush. The corporate tax rate is 30%. If the economy is strong, each firm will sell 1,500,000 brushes. If the economy enters a recession, each firm will sell 984,000 brushes. If the economy enters a recession, what will be the after-tax profit of Firm A?
?
Use the information provided below to calculate the following independently: 3.1 Break - even quantity 3.2 Margin of safety (in Rands) 3.3 The selling price per unit that will enable the company to break even 3.4 Total Marginal Income and net Profit/Loss if the sales Volume is 10% less than the budgeted figure. 3.5 The number of units that must be sold to earn a net profit of R811 000, if the selling price increases by R20 per unit and the variable costs increase by 10% Information The following budgeted information was extracted from the budget of Brad Manufacturers: Sales 30000 units Selling price per unit R220 Direct materials cost per unit R30 Direct labour cost per unit R20 Variable manufacturing overheads cost per unit R10 Fixed manufacturing costs R1 800000 Variable cost per unit R40 Fixed marketing and administration costs R600000