What is the firms break-even point in sales swedish crowns

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Reference no: EM131488740

Question: Imagine that you were a new CFO of Beily Inc., a children's bicycle manufacturer. The president, Mr. Zhao, started the business 2 years ago. The firm manufactures two types of products, bicycles for girls and bicycles for boys. However, the two products have the same prices and costs structures, the only differences are the colors and designs. Recently, the president has started to focus more on the financial aspects of managing the business. Mr. Zhao has set up a meeting for next week with you, to discuss matters such as the business and financial risks faced by the company. Accordingly, you are asked to prepare an analysis to assist his future management decisions. As a first step in the work, you are provided the following information regarding the company according to the past financial data:

As the next step, you are required to determine the break-even point in units of output for the company and report the result to Mr. Zhao. You are going to prepare an analytical income statement for the company. This statement will also be useful to Mr. Zhao in his work. In addition, you are planning to prepare and present in a format which is useful to answer the following questions to serve as a basis for Mr. Zhao's decisions for the company:

a. What is the firm's break-even point in sales Renminbi (RMB)?

b. If sales should increase by 20 percent (as you estimate), by what percentage would EBT (earnings before taxes) and net income increase?

c. Prepare another income statement, this time to verify the calculations from part (b)

2. Top Performance has been operating for several years in the outskirts of Ostersund, Sweden, and is a new manufacturer of a top-of-the-line outdoor jacket. You are starting an internship as assistant to the chief financial officer (CFO) of the company, and the owner and CEO, Anders Branstrom, has decided that this is the right time to know more about the business and financial risks his company must deal with. For this, the CFO has asked you to prepare an analysis to support him in his next meeting with Anders Branstrom a week from today. To make the required calculations, you have put together the following data regarding the cost structure of the company.

The CFO has instructed you to first determine the break-even point in units of output for the company. He requires that you prepare supporting documents that will demonstrate how you arrived at your conclusion and can facilitate his review of your work. Accordingly, you are required to have the information needed to prepare an analytical income statement for the company to be presented to the CFO. In a format that is acceptable for a meeting discussion with the CEO, you also need to prepare answers to the following questions:

a. What is the firm's break-even point in sales Swedish crowns (SEK)?

b. If sales should increase by 50 percent, by what percentage would EBT (earnings before taxes) and net income increase?

c. Prepare another income statement, this time to verify the calculations from part (b).

Reference no: EM131488740

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