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Financial breakeven point and leverage

Trident Food Corporation generated th following income statement for the most recent fiscal year.

Trident December 31, 2008 Sales Revenue $150,000

Variable Cost of Sales (112,500)

Gross profit 37,500

Fixed Operating Cost 24,000

Net Operating Income (EBIT) 13,500

Interest (10,000)

Earnings Before Taxes 3,500

Taxes (40%) (1,400)

Net Income 2,100

Each item of inventory Trident Foods produces has a selling price of $20

What is the degree of operating leverage of Trident?

What is the degree of total leverage for Trident?

What is the operating breakeven point in sales units (Q) for Trident?

What is the financial breakeven point for Trident?

How many units of inventory must Trident sell if it wants to operate at its financial breakeven point ?

Solution Preview

Trident Food Corporation generated th following income statement for the most recent fiscal year.

Trident December 31, 2008 Sales Revenue $150,000 ...

Solution Summary

Response helps in computation of financial breakeven point and leverage

$2.19