Expert Q&A Solutions

QUESTION

3. Long-Term Financial Decision - Breakeven Point

Strong Key Pte.Ltd., manufactures a key for houses with the selling
price $7/per unit. Each key has variable cost per unit $4, Fixed Cost
$60.000/per year. Interest expense for obligation is $15.000,- per year
and divided for preferred stock every year is $7.500. Annual sales for
this year are 40.000 units. Tax is 30%.

a. Calculate and make a graph BEP (Break Even Point) Strong Key
Pte.Ltd.

b. Calculate EBIT (Earnings Before Interest and Tax) and Earning

Available for Common Stockholders.

c. Calculate DOL (Degree of Operating Leverage), DFL (Degree of

Financial Leverage), and DTL (Degree of Total Leverage).

d. If Strong Key can add sales in units 20.000 units and become 60.000
units, what is the new EBIT?

ANSWER