Need the solution to Mini Case at the end of Chapter 12, pg 369, from the book F

Question

Need the solution to Mini Case at the end of Chapter 12, pg 369, from the book Foundations of Finance (7th ED).

MINI CASE


a. What is firm 1 and 2 break even points?



DATA Firm #1 Firm #2
Output level 80,000 120,000
Operating assets 4,000,000 6,000,000
Operating asset turnover 8 12
Return on operating assets 32% 48%
Degree of operating leverage 6 10
Interest expense 600,000 720,000
Tax rate 35% 42%

BREAK-EVEN #1 #2 Firm #1 Firm #2

Step 1: Operating profit margin .
Step 2: Sales .
Step 3: EBIT .
Step 4: Revenue before FC .
Step 5: Total VC .
Step 6: Total FC .
Step 7: Selling price per unit .
VC per unit .
Step 8: Break-even point .

Explanation / Answer

break even pointy is the point at which expense and revenue are equal

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