Smith Bottling Company (SBC) expects this year's sales to be variable operating costs are 75 percent of sales and its fixed operating costs are $100,000. SBC has $2,000,000 assets and a debt ratio of50%. It pays interest on its debt equal to 4% and its marginal tax rate is 40 percent.
a) If sales turn out to be $660.000 rather than $600,000, what will be SBC's EBIT? Be sure to calculate DOL rather than creating a new income statement.
b) If sales turn out to be $660,000 rather than $600,000, what will be SBC's NI? Be sure to will calculate DTL rather than creating a new income statement.