Question

A company sells 500 shirts at a price of $15 each with a cost of goods sold of $2 per shirt. The company has selling and administrative expenses of $2,500, depreciation expenses of $500, interest expenses of $1,000, and a tax rate of 35%. Calculate the operating (EBIT)

Answer 1

Answer:

EBIT= $3,500

Explanation:

EBIT is the earnings before interest and taxes.

First, we need to calculate the sales revenue and cost of goods sold:

Sales= 500*15= $7,500

COGS= 500*2= $1,000

Now, we can determine the EBIT:

Sales= 7,500

COGS= (1,000)

Gross profit= 6,500

Selling and administrative expense= (2,500)

Depreciation expense= (500)

EBIT= $3,500

If we want to determine the net income:

EBIT= 3,500

Interest= (1,000)

EBT= 2,500

Tax= 2,500*0.35= (875)

Depreciation= 500

Net income= 2,125