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kvv77 [185]
3 years ago
7

Companies generate income from their "regular" operations and from things like interest on securities they hold, which is called

non-operating income. Mitel Metals recently reported $9,000 of sales, $6,000 of operating costs other than depreciation, and $1,500 of depreciation. The company had no amortization charges and no non-operating income. It had issued $4,000 of bonds that carry a 7% interest rate, and its federal-plus-state income tax rate was 40%. What was the firm's operating income, or EBIT?
$1,100

$1,200

$1,300

$1,400

$1,500
Business
1 answer:
mylen [45]3 years ago
6 0

Answer:

$1,500

Explanation:

The computation of the firm operating income is shown below:

= Sales - operating cost other than depreciation - depreciation expenses

= $9,000 - $6,000 - $1,500

= $1,500

We simply deduct the operating cost and the depreciation expenses from the sales revenue amount to find out the earnings before income and taxes (EBIT) or firm operating income

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We solve for the break even point:

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We solve for the margin of safety:

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Now we compare against our sales:

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Answer:

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Explanation:

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