6 +>, of sales
'1( #ompare BIT levels6
'a( #hange < =B+,>>> =+>,>>> < =1+,>>>
-ercentage change < =1+,>>> < @>.>>,
=+>,>>>
'b( #hange < =*0>,>>> =*>>,>>> < =0>,>>>
-ercentage change < =0>,>>> < 0>.>>,
=*>>,>>>
'c( #hange < =*.+,>>> =*+>,>>> < =0+,>>>
-ercentage change < =0+,>>> < 1>.>>,
=*+>,>>>
'd( #hange < =5+>,>>> =5>>,>>> < =+>,>>>
9easuring the "egree o$ 8everage 15(5
-ercentage change < =+>,>>> < 5+.>>,
=5>>,>>>
4hile the absolute change increases as sales goes up, the percentage change decreases as the
firm's BIT rises.
SO8UTION =?O(8E9 15(.
'*( #onstruct income statements for each sales level6
'a( 'b( 'c( 'd(
$ales =5+>,>>> =1>>,>>> =1+>,>>> =0>>,>>>
?ariable cost
6 0>, of sales
'1( #ompare BIT levels6
'a( #hange < =9@,+>> =1>,>>> < =1@,+>>
-ercentage change < =1@,+>> < *5+.>>,
=1>,>>>
'b( #hange < =*>+,>>> =9>,>>> < =0+,>>>
-ercentage change < =0+,>>> < @+.>>,
=9>,>>>
'c( #hange < =*05,+>> =.>,>>> < =+5,+>>
-ercentage change < =+5,+>> < +B.11,
=.>,>>>
15(. /ppen#i* 15(
'd( #hange < =*B>,>>> =*5>,>>> < =9>,>>>
-ercentage change < =9>,>>> < +>.>>,
=*5>,>>>
4hile the absolute change increases as sales goes up, the percentage change decreases as the
firm's BIT increases.
SO8UTION =?O(8E9 15(3
HO3 < contribution
BIT
"rom problem *+B*6
'a( HO3 < =*B>,>>> < * 4ith no fixed operating costs, HO3 always < *
=*B>,>>>
In problem *+B1, sales increased to =0>>,>>> 'from =1>>,>>> in problem *+B*(, a 11.11,
increase. )pplying the HO3 numbers from above to the 11.11, change in sales gives the
percentage change in BIT in problem *+B16
'a( 11.11,'*( < 11.11,
'b( 11.11,'*.5.( < 01.>>,, within roundoff of 05.B9,
'c( 11.11,'*.B>( < 9>.>>,
'd( 11.11,'1.>>( < *>>.>>,
SO8UTION =?O(8E9 15(:
HO3 < contribution
BIT
"rom problem *+B56
'a( HO3 < =9*5,+>> < * 4ith no fixed operating costs, HO3 always < *
9easuring the "egree o$ 8everage 15(3
=9*5,+>>
In problem *+B0, sales increased to =5,>>>,>>> 'from =*,@+>,>>> in problem *+B5(, a *0.5.,
increase. )pplying the HO3 numbers from above to the *0.5., change in sales gives the
percentage change in BIT in problem *+B06
'a( *0.5.,'*( < *0.5.,
'b( *0.5.,'*.15( < *B.B9,,
'c( *0.5.,'*..9( < 5B.>*, within roundoff error
'd( *0.5.,'1.@@( < +1.B@,
In problem *+B*1, BIT increased to =++>,>>> 'from =+>>,>>> in problem *+B**(, a *>,
increase. )pplying the H"3 numbers from above to the *>, change in BIT gives the
percentage change to -$ in problem *+B*16
'a( *>,'*( < *>.>>,
'b( *>,'*.5+( < *5.+>,
'c( *>,'*.9@( < *9.9@,
'd( *>,'5.+>( < 5+.>>,
SO8UTION =?O(8E9 15(1:
H"3 < BIT
earnings before taxes
"rom problem *+B*56
'a( H"3 < =5,+>>,>>> < * 4ith no fixed financing costs 'interest(,
=5,+>>,>>> H"3 always < *