Data of cost structure of the company: Camping USA Inc.
Output level 120,000 units
Operating assets $6,000,000
Operating assets turnover 12 times
Return on operating assets 48%
Degree of operating leverage 10 times
Interest expense $720,000
Tax rate 42%
Determine the break-even point in units of output for the company; also prepare supporting documents, which demonstrate how you arrived at your conclusion. Have the information needed to prepare an analytical income statement. In a format that is acceptable for a meeting discussion, prepare answers to the following questions:
a) What is the firm's break-even point in sales dollars?
b) If sales should increase by 40%, by what percentage would the EBIT (earnings before taxes) and net income increase?
c) Prepare another income statement, this time to verify the calculations from part d.
The solution explains some calculations relating to breakeven analysis