QUESTION: Jen and Larry also believe that under optimistic conditions, yogurt re

Question

QUESTION: Jen and Larry also believe that under optimistic conditions, yogurt revenues could reach $1.5 million in 2013. Show what would happen to the venture's EBDAT? NOTE: Each small cup of yogurt is sold for $3 and the cost of producing the frozen yogurt is $1.50 per cup. Admin. expenses, including Jen and Larry's salaries along with 2 other accountants were estimated to be $180,000 in 2013. Marketing expenses, advertising were projected to be $200,000 in 2013. Interest expenses were estimated at 15,000. The average tax rate is expected to be 25% of taxable income. Equation: EBDAT= Revenues- Variable Costs- Cash fixed costs

Explanation / Answer

Current Break even point is ( 3 - 1.5 ) x = 180,000 + 200,000 + 15,000 x = 395,000 / 1.5 x = 263,333.33 cups is the breakeven if 30,000 extra was spent on advertising, the breakeven point would increas by 30,000/1.5 = 20,000 cups hence the new breakeven point is 283,333.33 cups

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---