Use the following information about Rat Race Home Security, Inc. to answer the q

Question

Use the following information about Rat Race Home Security, Inc. to answer the questions:

Average selling price per unit $326.

Variable cost per unit $184

Units sold 428

Fixed costs $9,940

Interest expense 16,106

Based on the data above, what will be the resulting percentage change in earnings per share of Rat Race Home Security, Inc. if they expect operating profit to change -1.5 percent?

(You should calculate the degree of financial leverage first). (Write the percentage sign in the "units" box). Round the answer to two decimals

Explanation / Answer

Rat Race Home Security, Inc.

Sales ($326 x 428units)

$139,528

Less: variable cost ($184x 428 units)

78752

Contribution Margin

60776

Less: Fixed cost

EBIT

50836

51598.54

Less: Interest

16106

16106

Earning before Tax (EBT)

34730

35492.54

Degree of Financial Leverage = EBIT/(EBT)

1.46374892

1.4537855

Earning per share / EBIT = DOL

EPS = EBIT/DOL

34730

35492.54

Change in EPS = ($35492.54 - $34730)/$34730

2.19%

Sales ($326 x 428units)

$139,528

Less: variable cost ($184x 428 units)

78752

Contribution Margin

60776

Less: Fixed cost

9940

EBIT

50836

51598.54

Less: Interest

16106

16106

Earning before Tax (EBT)

34730

35492.54

Degree of Financial Leverage = EBIT/(EBT)

1.46374892

1.4537855

Earning per share / EBIT = DOL

EPS = EBIT/DOL

34730

35492.54

Change in EPS = ($35492.54 - $34730)/$34730

2.19%

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.