Question

HiLo Mfg. is analyzing a project with anticipated sales of 12,500 units, ±2 percent. The variable cost per unit is $13, ± 2 percent, and the expected fixed costs are $237,000, ±1 percent. The sales price is estimated at $69 a unit, ±3 percent. The depreciation expense is $68,000 and the tax rate is 22 percent. What is the earnings before interest and taxes under the base-case scenario?

Answer 1

Answer:

The earnings before interest and taxes under the base-case scenario is $395,000

Explanation:

For computing the EBIT we have to use the equation which is shown below:

EBIT = Sales revenue - variable cost - fixed cost - depreciation expense

Where,

Sales revenue = Number of units × Selling price per unit

                        = 12,500 units × $69 per unit

                       = $862,500

Variable cost = Number of units × variable cost per unit

                        = 12,500 units × $13 per unit

                       = $162,500          

And, the other items values remain the same

Now put these values to the above formula  

So, the value would equal to

= $862,500 - $162,500 - $237,000 - $68,000

= $395,000