New Wave Co. manufactures an assortment of cotton fabrics. Given below are some of the financial data from their recent operations:
Average selling price per unit RM28
Average variable cost per unit RM18
Units sold 50,000 units
Fixed cost RM35,000
Interest expense RM15,000
Tax rate 26 percent
i) What is the earning before interest and taxes (EBIT) FOR THE COMPANY?
ii) Calculate the break-even point in units.
iii) Calculate New Wave's degree of operating leverage (DOL).
iv) Calculate New Wave's degree of financial leverage (DFL).
v) If sales should increase by 10 percent, by what percent would the net income increase?