5. Maxine, a very recent FBM graduate, plans to open wholesale diary products enterprises so that she can put her business skills into practice. Maxine expects first year sales to total 5.5 million shillings. She desires to earn a target pre-tax profit of b1 million shillings during her first year of operation. Her variable costs are expected to be 40% of sales Required: (i) How large can Maxine's fixed costs be if she is to meet her profit target? (ii) (ii)What is Maxine's break-even point at that level of fixed costs? (a) If the tax rate is 40% of the enterprise's income, what variable cost ratio would maintain the same target profit at the given sales level and the total fixed cost determined in (ii) above?

5. Maxine, a very recent FBM graduate, plans to open wholesale diary products enterprises so that she can put her business skills into practice. Maxine expects first year sales to total 5.5 million shillings. She desires to earn a target pre-tax profit of b1 million shillings during her first year of operation. Her variable costs are expected to be 40% of sales Required: (i) How large can Maxine's fixed costs be if she is to meet her profit target? (ii) (ii)What is Maxine's break-even point at that level of fixed costs? (a) If the tax rate is 40% of the enterprise's income, what variable cost ratio would maintain the same target profit at the given sales level and the total fixed cost determined in (ii) above?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 6P

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