Expects this year sales to be variable operating costs

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Reference no: EM131580009

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.

Reference no: EM131580009

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