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Change in Sales Level

Reported sales of $2.4 million. Variable costs are 80% of sales and fixed costs are $160,000. The firm has a 35% tax rate and interest expense is $120,000.

If EPS is $3.75, what would the sales level have to change to before EPS would fall below $3.00?

Answer: $2.2 million

I need the calculation in order to compute this in the future. What formula do I use if I do not have the answer in front of me?

Solution Preview

Initially, the total net income is
NI1 = (Sales1 * (1-variable cost) - fixed cost - interest expenses)*(1-t)
NI1 = (2.4 * (1-80%) -0.16 - ...

Solution Summary

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$2.19