Calculate bwp dfl and dtl

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Reference no: EM131011183

1. Calculate BWP's DFL and DTL before and after the acquisition of the new machine.

2. Use the information from the previous two problems. Calculate BWP's breakeven point in units and dollars, with and without the purchase of the new machine.

3. The Spitfire Model Airplane Company has the following modified income state- ment ($000) at 100,000 units of production.

Revenue	$10,000
Variable cost	6,500
Fixed cost	2,200
EBIT	$1,300
Interest (@ 10%)	500
EBT	$800
Tax (@ 40%)	320
EAT	$480
Number of shares	20,000

a. What are Spitfire's contribution margin and dollar breakeven point?

b. Calculate Spitfire's current DFL, DOL, and DTL.

c. Calculate the current EPS and estimate what it would become if sales declined by 25%. Use the DTL first and then recalculate the modified income state- ment. (Assume a negative EBT generates a negative tax.)

Reference no: EM131011183

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