Finansal Yönetim Finance - Recitation Questions 1. Air Filter, Inc., sells its products for $6 per unit. It has the following costs: Rent ............. $100,000 Factory labor $1.20 per unit Executive salaries under contract ....... $89,0000 Raw material $.60 per unit Separate the expenses between fixed and variable cost per unit. Using this information and the sales price per unit of $6, compute the break- even point. 2. Eaton Tool Company has fixed costs of $200,000, sells its units for $56, and has variable costs of $31 per unit. a . Compute the break-even point. b . Ms. Eaton comes up with a new plan to cut fixed costs to $150,000. However, more labor will now be required, which will increase variable costs per unit to $34. The sales price will remain at $56. What is the new break-even point?3. The Har mon Company manufactures skates. The company ’ s income statement for 2008 is as follows: HARMON COMPANY Income Statement For the Year Ended December 31, 2008 Sales (30,000 skates @ $25) ...... $750,000 Less: Variable costs (30,000 skates at $7) ............................... 210,000 Fixed costs ........................... 270,000 Earnings before interest and taxes (EBIT) .............................. 270,000 Interest expense ......................... 170,000 Earnings before taxes (EBT) ..... 100,000 Income tax expense (35%) ........ 35,000 Earnings after taxes (EAT) ........ $ 65,000 Given this income statement, compute the following: a . Degree of operating leverage. b . Degree of financial leverage. c . Degree of combined leverage. d . Break-even point in units. 4. Leno ’ s Drug Stores and Hall ’ s Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Leno and Hall are presented below. Leno Hall Debt @ 10% .. $100,000 Debt @ 10% .. $200,000 Common stock, $10 par 200,000 Common stock, $10 par . 100,000 Total .............. $300,000 Total ............... $300,000 Shares ............ 20,000 Common shares ............. 10,000 Compute earnings per share if earnings before interest and taxes are $20,000, $30,000, and $120,000 (assume a 30 percent tax rate).5. Sharpe Computer Graphics Corporation has forecasted the following monthly sales: January ... $80,000 July . $ 30,000 February 70,000 August 31,000 March ..... 10,000 September 40,000 April ....... 10,000 October 70,000 May ........ 15,000 November 90,000 June ........ 20,000 December 110,000 Total annual sales = $576,000 The firm sells its graphic forms for $5 per unit, and the cost to produce the forms is $2 per unit. A level production policy is followed. Each month ’ s production is equal to annual sales (in units) divided by 12. Of each month ’ s sales, 30 percent are for cash and 70 percent are on account. accounts receivable are collected in the month after the sale is made. All a . Construct a monthly production and inventory schedule in units. Beginning inventory in January is 15,000 units. (Note: To do part a , you should work in terms of units of producti on and units of sales.) b . Prepare a monthly schedule of cash receipts. Sales in the December before the planning year are $90,000. Work part b using dollars. c . Determine a cash payments schedule for January through December. The production costs of $2 pe r unit are paid for in the month in which they occur. Other cash payments, besides those for production costs, are $30,000 per month. d . Prepare a monthly cash budget for January through December. The beginning cash balance is $5,000 and that is also the m inimum desired.