Carjack Inc. sells iPhone chargers. It has variable cost of $5 per item. Fixed c
ID: 2710200 • Letter: C
Question
Carjack Inc. sells iPhone chargers. It has variable cost of $5 per item. Fixed costs are $500/week. It sells iPhone charger for $20. It estimates to sell 3,000 chargers per year. a) Calculate Carjack's total annual revenue b) Calculate Carjack's total annual cost c) Calculate Carjack's breakeven unit sales d) Calculate EBIT e) What is the operating income, at the breakeven sales level f) Calculate DOL for 10% change in sales g) If Carjack has $1,000 interest payment on debt, what is DFL h) What is Carjack's DCL? j) If sales increase by 20%, how much net income increases?Explanation / Answer
a)
Total annual revenue:
= 3,000×$20
= $60,000
b)
Total annual cost:
= $500×52+3,000×$5
= $41,000
c)
Breakeven unit sales:
= Fixed costs÷Contribution per unit
= $26,000÷($20-$5)
= 1,734 units
d)
EBIT:
= $60,000-$41,000
= $19,000