Texts: Problem Set
Question 1: The following information pertains to the Strawberry Shortcake Bhd chain:
Sales: RM600,000
Variable costs: RM200,000
Total contribution margin: RM400,000
Fixed costs: RM150,000
EBIT: RM250,000
Interest expense: RM50,000
Earnings before taxes: RM200,000
Taxes (30%): RM60,000
Net income: RM140,000
Required:
a) What is the BEP (RM) for Strawberry Shortcake Bhd?
b) Calculate the degree of operating leverage at this level of output for Strawberry Shortcake Bhd.
c) Calculate the degree of financial leverage at this level of output for Strawberry Shortcake Bhd.
d) What is the combined leverage for Strawberry Shortcake Bhd?
e) If sales increase by 20%, what is the percentage increase in EBIT?
f) If sales increase by 10%, what will be Strawberry Shortcake Bhd's EPS if the firm has 50,000 shares outstanding?