Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 5P
a.
Summary Introduction
To calculate: The break-even point (BEP) of Eaton Tool Company.
Introduction:
Break-even point (BEP):
BEP is a no-
b.
Summary Introduction
To calculate: The new break-even point (BEP) of Eaton Tool Company.
Introduction:
Break-even point (BEP):
BEP is a no-profit and no loss situation. It is a point in production at which the expenditure in totality is equal to the income in totality.
c.
Summary Introduction
To explain: The likely profitability in case of a high volume levels.
Introduction:
Break-even point (BEP):
BEP is a no-profit and no loss situation. It is a point in production at which the expenditure in totality is equal to the income in totality.
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c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
Profitability will be less
Profitability will be more
Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of $50 per unit.
a. Compute the break-even point.
Break-even point
b. Ms. Eaton comes up with a new plan to cut fixed costs to $340,000. However, more labor will now be required, which will increas
variable costs per unit to $53. The sales price will remain at $94. What is the new break-even point?
Note: Round your answer to the nearest whole number.
New break-even point
units
Profitability will be less
Profitability will be more
units
c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
The manufacturer of a product that a variable cost of $2.50 per unit and total fixed cost of $125,000 wants to determine the level of output necessary to avoid losses.
a. what level of sales is necessary to break, even if the product is sold for $4.25? what will be the manufacturer's profit or loss on the sales of 1000,00 units?
b.If fixed costs rise to $175,000, what is the new level of sales necessary to break even?
c.If variable cost decline to $2.25 per unit, what is the new level of sales necessary to break even?
d. If fixed cost were to increase to $17,000, while variable cost declined to $2.25 per unit, what is the new break-even level of sales?
e. If a major proportion of fixed costs were noncahs (depreciation), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligation as they come due? Suppose $100,000 of the above fixed cost $125,000 werre depreciation expense. what level of sales would be the cash break-even level of sales?…
Chapter 5 Solutions
Foundations of Financial Management
Ch. 5 - Discuss the various uses for break-even analysis....Ch. 5 - What factors would cause a difference in the use...Ch. 5 - Explain how the break-even point and operating...Ch. 5 - Prob. 4DQCh. 5 - What does risk taking have to do with the use of...Ch. 5 - Discuss the limitations of financial leverage....Ch. 5 - Prob. 7DQCh. 5 - Explain how combined leverage brings together...Ch. 5 - Explain why operating leverage decreases as a...Ch. 5 - Prob. 10DQ
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Draw two break-even graphs-one for a conservative...Ch. 5 - Prob. 5PCh. 5 - Shawn Pen & Pencil Sets Inc. has fixed costs of ....Ch. 5 - Calloway Cab Company determines its break-even...Ch. 5 - Prob. 8PCh. 5 - Boise Timber Co. computes its break-even point...Ch. 5 - The Sterling Tire Company’s income statement for...Ch. 5 - Prob. 11PCh. 5 - Healthy Foods Inc. sells 50-pound bags of grapes...Ch. 5 - United Snack Company sells 50-pound bags of...Ch. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Lenow’s Drug Stores and Hall’s Pharmaceuticals...Ch. 5 - The capital structure for Cain Supplies is...Ch. 5 - Sterling Optical and Royal Optical both make glass...Ch. 5 - Prob. 19PCh. 5 - Sinclair Manufacturing and Boswell Brothers Inc....Ch. 5 - DeSoto Tools Inc. is planning to expand...Ch. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Mr. Gold is in the widget business. He currently...Ch. 5 - Delsing Canning Company is considering an...Ch. 5 - Prob. 2WECh. 5 - Prob. 3WECh. 5 - Prob. 4WECh. 5 - Prob. 5WE
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