Assignment: Managerial Finance
Break-even, Financial and Operating Leverages Johnson Products, Inc. Income Statement For the Year Ended December 31, 2018.
Sales (40,000 bags at $50 each) .................................. $2,000,000
Less: Variable costs (40,000 bags at $25)................ 1,000,000
Fixed costs.............................................................. 600,000
Earnings before interest and taxes .............................. 400,000
Interest expense ........................................................... 120,000
Earnings before taxes ................................................. 280,000
Income tax expense (20%) .......................................... 56,000
Net income .................................................................. $ 224,000
Based on the information above, calculate (show all calculations and responses in good form):
i. Break-even in units (in dollars and units). Explain what your numbers mean. As a manager, how would you use the numbers in financial planning?
ii. What is the degree of financial leverage? Explain what your number mean. As a manager, how would you use the numbers in financial planning?
iii. What is the degree of operating leverage? Explain what your number mean. As a manager, how would you use the numbers in financial planning?
Format your assignment according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.