Compute the percentage increase in these earnings

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Reference no: EM13778501

A. What is the operating income (EBIT) for both firms?

Sales Revenue = 10000*2.5=25000

Variable cost = 10000*1=10000

Fixed cost = 12000

EBIT=25000-10000-12000=3000

B. What are the earnings after interest?

Firm A Firm B

Interest=0 Interest= 5000*10%=500

Earnings after tax=3000 Earnings after tax=2500

C. If sales increase by 10 percent to 11,000 units, by what percentage will each firm's earnings after interest income? To answer the question, determine the earnings after taxed and compute the percentage increase in these earnings from the answers you derived in part b.

Reference no: EM13778501

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