ABC COMPANY

Income Statement for the Years Ended December 31, 20X2 and 20X1

$ thousand
(except EPS),
20X2

Total Operating Revenues (or Total Total Operating Revenues (or Total
Sales Revenues) Sales Revenues)
1,183.6
Less: Cost of Goods Sold (COGS) Less: Cost of Goods Sold (COGS)
528.6
Gross Profits 655.0 Gross Profits

Less: Operating Expenses Less: Operating Expenses

Selling Expenses 275.0 Selling Expenses

General and Administrative Expenses General and Administrative

(G&A) Expenses (G&A)
225.0
Depreciation Expense 100.0 Depreciation Expense
Fixed Expenses 75.0 Fixed Expenses

Total Operating Expenses Total Operating Expenses

675.0
Net Operating Income - 20.0 Net Operating Income

Other Income 20.0 Other Income

Earnings before Interest and Taxes Earnings before Interest and Taxes
(EBIT) (EBIT)
- 0.0
Less: Interest Expense Less: Interest Expense

Interest on Short-Term Notes 10.0 Interest on Short-Term Notes

Interest on Long-Term Borrowing 50.0 Interest on Long-Term Borrowing

Total Interest Expense Total Interest Expense

60.0
Pretax Earnings (Earnings before Pretax Earnings (Earnings before
Taxes, EBT) Taxes, EBT)
- 60.0
Less: Taxes Less: Taxes
Current Tax 160.0 Current Tax
Deferred Tax - 184.0 Deferred Tax
Total Tax (rate = 40%) - 24.0 Total Tax (rate = 40%)

Net Income (Earnings after Taxes, Net Income (Earnings after Taxes,
EAT) EAT)
- 36.0
Less: Preferred Stock Dividends Less: Preferred Stock Dividends
95.0

Net Earnings Available for Common Net Earnings Available for Common
Stockholders Stockholders
- 131.0
Earnings per Share (EPS), 100,000 Earnings per Share (EPS), 100,000
shares outstanding shares outstanding
-$1.31
Retained Earnings 220.0 Retained Earnings
Dividends Paid to Holders of Common Dividends Paid to Holders of
Stock Common Stock
- 351.0
Added Information Added Information
Unit Selling Price $25.75 Unit Selling Price

Number of Units Sold dùng goal seek để Number of Units Sold

45965 tìm ra ebit= 0
COGS, as percent of Sales 44.66% COGS, as percent of Sales
Break-Even Point, units (algebraic Break-Even Point, units (algebraic
method) 45.965 method)

Break-Even Point, sales in $ thousand Break-Even Point, sales in $ thousand

$1,183.6
Quadratic Regression Equation(Y=a+bX+cX^2)

Unit Selling Price(X) X^2

Number of Units ThaUnit Sold Forecast
$20.00 $400.00 120000 $118,924
$22.00 $484.00 115000 $116,298
$24.00 $576.00 108000 $109,230
$25.75 $663.06 100000 $99,402
$28.00 $784.00 84000 $81,769
$30.00 $900.00 60000 $61,376

-555.23063618579 22006.8032821382 -99120.176271021

79.7716547267715 3998.19230198411 49356.9768129485
0.995397721457396 1964.95700082821 #N/A
324.425514093543 3 #N/A
2505250165.28802 11583168.0453114 #N/A

Sensitivity Analysis ($ values are in thousands of dollars except for unit s

Unit Selling Number of Total Sales Gross

Price Units Sold Revenue Profit

$23.94 109517 2,621.6 1,450.8

$20.00 1316.2
$21.00 1373.3
$22.00 1415.9
$23.00 1442.4
$24.00 1450.8
$25.00 1439.3
$26.00 1406.0
$27.00 1349.3
$28.00 1267.0
$29.00 1157.6
$30.00 1019.0
 $ thousand $ thousand
(except EPS), (except EPS),
20X2 20X2

Total Operating
Revenues (or Total Sales
2,621.6 Revenues) 2,575.0 ROL 1.850649
Less: Cost of Goods Sold
1,170.8 (COGS) 1,150.0
1,450.8 Gross Profits 1,425.0
Less: Operating
Expenses
275.0 Selling Expenses 275.0
General and
Administrative Expenses
225.0 (G&A) 225.0
100.0 Depreciation Expense 100.0
75.0 Fixed Expenses 75.0
Total Operating Expenses
675.0 675.0
775.8 Net Operating Income 750.0

20.0 Other Income 20.0

Earnings before Interest
and Taxes (EBIT)
795.8 770.0
Less: Interest Expense
Interest on Short-Term
10.0 10.0
Notes
Interest on Long-Term
50.0 50.0
Borrowing

Total Interest Expense

60.0 60.0
Pretax Earnings (Earnings
before Taxes, EBT)
735.8 710.0
Less: Taxes
160.0 Current Tax 160.0
134.3 Deferred Tax 124.0
294.3 Total Tax (rate = 40%) 284.0
Net Income (Earnings
after Taxes, EAT)
441.5 426.0
Less: Preferred Stock
95.0 Dividends 95.0

Net Earnings Available for

Common Stockholders
346.5 331.0
Earnings per Share
(EPS), 100,000 shares
$3.46 outstanding $3.31
220.0 Retained Earnings 220.0
 Dividends Paid to Holders
of Common Stock
126.5 111.0
ded Information
$23.94

109517
44.66%

49.445

$1,183.6

ousands of dollars except for unit selling price.)

Earnings
Earnings
Net before Dollar
before Earnings Units to
Operating Interest Sales to
Taxes after Taxes Break Even
Income and Taxes Break Even
(EBT)
(EBIT)

775.8 795.8 735.8 441.5 49.445 $1,183.6

641.2 661.2 601.2 360.7 59.180 1183.6
698.3 718.3 658.3 395.0 56.362 1183.6
740.9 760.9 700.9 420.5 53.800 1183.6
767.4 787.4 727.4 436.4 51.461 1183.6
775.8 795.8 735.8 441.5 49.316 1183.6
764.3 784.3 724.3 434.6 47.344 1183.6
731.0 751.0 691.0 414.6 45.523 1183.6
674.3 694.3 634.3 380.6 43.837 1183.6
592.0 612.0 552.0 331.2 42.271 1183.6
482.6 502.6 442.6 265.5 40.814 1183.6
344.0 364.0 304.0 182.4 39.453 1183.6
 HANCOCK CORPORATION
Process A Process B
10% 10% 10%
Base Sales Increase in Decrease in Base Sales Increase in
Sales Sales Sales
Fixed cost $10,000.00 $10,000.00 $10,000.00 $20,000.00 $20,000.00
Unit variable cost $7.00 $7.00 $7.00 $5.00 $5.00
Selling price $10.00 $10.00 $10.00 $10.00 $10.00
Units sold per year 5000 5500 4500 5000 5500
Break-even point, units 3333 3333 3333 4000 4000
Sales revenue $50,000.00 $55,000.00 $45,000.00 $50,000.00 $55,000.00
Less variable costs $35,000.00 $38,500.00 $31,500.00 $25,000.00 $27,500.00
Less fixed costs $10,000.00 $10,000.00 $10,000.00 $20,000.00 $20,000.00
EBIT $5,000.00 $6,500.00 $3,500.00 $5,000.00 $7,500.00
Changes from Base
Change in EBIT $1,500.00 -$1,500.00 $2,500.00
Relative change in EBIT 30.0% -30.0% 50.00%
Change in sales revenue $5,000.00 -$5,000.00 $5,000.00
Relative change in sales revenue 10.00% -10.00% 10.00%
Operating leverage at base 3.00 3.00 5.00
Operating Leverage at Conditions in Row 3
Sales less variable costs, SLVC
Degree of operating leverage, DOL 3.00 2.54 3.86 5.00 3.67
Percent Changes from Base Conditions
Percent change in DOL Base -15.4% 28.6% Base -26.67%
Percent change in EBIT Base 30.0% -30.0% Base 50.00%
 Process B
10%
Decrease in
Sales

$20,000.00
$5.00
$10.00
4500
4000
$45,000.00
$22,500.00
$20,000.00
$2,500.00

-$2,500.00
-50.00%
-$5,000.00
-10.00%
5.00
Row 3

9.00
tions
80.00%
-50.00%
 Example 11-1: STRAIGHT-LINE DEPRECIATION
Asset cost $75,000
Salvage value
$10,000
Life, years 5
Depreciation Schedule
Year
Item 1 2 3 4 5
Book value, beginning of year $75,000 $62,000 $49,000 $36,000 $23,000
Annual depreciation $13,000 $13,000 $13,000 $13,000 $13,000 SLN
Book value, end of year $62,000 $49,000 $36,000 $23,000 $10,000
Accumulated depreciation $13,000 $26,000 $39,000 $52,000 $65,000

Example 11-2: SUM-OF-YEARS DEPRECIATION

Asset cost $75,000
Salvage value $10,000
Life, years 5
Depreciation Schedule
Year
Item 1 2 3 4 5
Book value, beginning of year $75,000 $53,333 $36,000 $23,000 $14,333 SYD
Annual depreciation $21,667 $17,333 $13,000 $8,667 $4,333
Book value, end of year $53,333 $36,000 $23,000 $14,333 $10,000
Accumulated depreciation $21,667 $39,000 $52,000 $60,667 $65,000

Example 11-3: DOUBLE-DECLINING BALANCE DEPRECIATION

Asset cost $75,000
Salvage value $10,000
Life, years 5
Depreciation Schedule
Year
Item 1 2 3 4 5
Book value, beginning of year $75,000 $45,000 $27,000 $16,200 $10,000
Annual depreciation $30,000 $18,000 $10,800 $6,200 $0 DDB
Book value, end of year $45,000 $27,000 $16,200 $10,000 $10,000
Accumulated depreciation $30,000 $48,000 $58,800 $65,000 $65,000