The spitfire model airplane company has the following modified income

The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production.

      Revenue                $10,000

      Variable Cost             6,500

      Fixed Cost                 2,200

      EBIT                      $  1,300

      Interest (@ 10%)                      500

      EBT                       $     800

      Tax (@ 40%)                320

      EAT                       $     480

      # shares                   20,000


a. What are Spitfire’s contribution margin and dollar breakeven point?

b. Calculate Spitfire’s current DFL, DOL, and DTL.

c. Calculate the current EPS and estimate what it would become if sales declined by 25%.  Use the DTL first and then recalculate the modified income statement.  (Assume a negative EBT generates a negative tax.)



The Spitfire Model Airplane Company has the following modified income statement ($000)

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