Shock Electronics sells portable heaters for $63 per unit, and the variable cost to produce them is $36. Mr. Amps estimates that the fixed costs are $94,500.

(a) Compute the break-even point in units.

(b) Fill in the table below (in dollars) to illustrate that the break-even point has been achieved. (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $59 and has a variable cost of $31. There are $42,840 in fixed costs involved in the production process.

(a)

Compute the break-even point in units. (Round your answer to the nearest whole number.)

(b)

Find the sales (in units) needed to earn a profit of $15,960.

The Sterling Tire Company’s income statement for 2010 is as follows:

STERLING TIRE COMPANY

Income Statement

For the Year Ended December 31, 2010

Sales (36,000 tires at $92 each) $ 3,312,000

Less: Variable costs (36,000 tires at $46) 1,656,000

Fixed costs 560,000

________________________________________

Earnings before interest and taxes (EBIT) 1,096,000

Interest expense 58,000

________________________________________

Earnings before taxes (EBT) 1,038,000

Income tax expense (20%) 207,600

________________________________________

Earnings after taxes (EAT) $ 830,400

(a) Compute the degree of operating leverage. (Enter only numeric value rounded to 2 decimal places.)

(b)

Compute the degree of financial leverage. (Enter only numeric value rounded to 2 decimal places.)

(c)

Compute the degree of combined leverage. (Enter only numeric value rounded to 2 decimal places.)

(d)

Compute the break-even point in units. (Enter only numeric value rounded to nearest whole number.)

Austin Electronics expects sales next year to be $1,090,000 if the economy is strong, $745,000 if the economy is steady, and $394,000 if the economy is weak. The firm believes there is a 30 percent probability the economy will be strong, a 40 percent probability of a steady economy, and a 30 percent probability of a weak economy.

What is the expected level of sales for next year? (Omit the “$” sign in your response.)

Sanders’ Prime Time Company has annual credit sales of $2,592,000 and accounts receivable of $604,800. Compute the average collection period. (Use 360 days in a year.)

Midwest Tires has expected sales of 22,400 tires this year, an ordering cost of $5 per order, and carrying costs of $1.40 per tire.

(a)

What is the economic ordering quantity?

(b)

How many orders will be placed during the year?

(c)

What will the average inventory be?

Compute the cost of not taking the following cash discounts.

(a)

3/14, net 65. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places . Omit the “%” sign in your response.)

(b)

3/23, net 45. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.)

(c)

4/11, net 55. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.)

(d)

4/18, net 145. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.)

Your bank will lend you $2,100 for 45 days at a cost of $30 interest.

What is your effective rate of interest? (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.)