14 Oct Bob’s Baked Goods Company
Bob’s Baked Goods Company reported the following income statement for 2009:
Sales $2,500,000
Variable Costs 900,000
Fixed Operating Costs 700,000
EBIT 900,000
Interest Expense 200,000
EBT 700,000
Taxes (30%) 210,000
Net Income $490,000
Earnings Per Share $4.90
If Bob’s sales next year increase by 20%, Bob’s EBIT will increase: (Points :1)
2. Based on the data contained in Table A, what is the break-even point in sales dollars?
TABLE A
Average selling price per unit $18.00
Variable cost per unit $13.00
Units sold 400,000
Fixed costs $650,000
Interest expense $ 50,000 (Points : 1)
3. The payment of dividends may indirectly result in closer monitoring of management’s investment activities, thus increasing shareholder value by (Points : 1) #2
4. A high degree of variability in a firm’s earnings before interest and taxes refers to (Points : 1)
5. What is the economic difference between a stock dividend and a stock split? (Points : 1)
6. If a firm has no operating leverage and no financial leverage, then a 10% increase in sales will have what effect on EPS? (Points : 1) #7
7. Financial leverage is distinct from operating leverage since it accounts for (Points : 1)
8. Dividend changes may be used by management as a credible communication tool to signal investors about future earnings under which of the following dividend policy theories? (Points : 1)
9. The break-even point is equal to (Points : 1)
10. Based on the data contained in Table A, what is the break-even point in units produced and sold?
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