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Meyersons Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each pie will sell for $10 and the variable cost per pie will be $3. Total fixed operating costs are expected to be $20,000. Meyerson's faces a marginal tax rate of 35%, will have interest expenses associated with this line of $3,000, and expects to sell about 2,500 pies in the first year.

a. Put together an income statement for the pie line's first year. Is the line expected to be profitable?

b. find out the operating break-even point in both units and dollars.

c. How many pies would Meyerson's need to sell in order to achieve earnings, before interest and taxes, of $15,000?

 

Basic Finance, Finance

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