Calculate operating break-even point in both units

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Reference no: EM133346097

Question: Big Blue Buckets is considering the addition of a new line of small woven leather buckets. It is expected that each bucket will sell for $35.00 and the variable operating cost per bucket will be $15.00. Total fixed operating costs are expected to be $60,000. The company has a 30% tax rate. They will have interest expense associated with this line of $14,000. Big Blue Buckets expects to sell 5,000 small woven leather buckets in the first year.

a. Put together the complete income statement for the small woven leather bucket line's first year. Is the line expected to be profitable?

b. Calculate the operating break-even point in both units and dollars.

c. How many buckets would Big Blue Buckets need to sell to earn a target EBIT of $100,000?

d. If sales are expected to increase by 10% next year (Year 2), show the Proforma Income Statement for next year. Why does Net Income change by more (or less) than 10%? Explain.

Reference no: EM133346097

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