Network Scan Data

Answers
    Part 1
    Genuine Motor Products            ** Question 3 and 4 Says to use Equation 5-1, 5-3, 5-5, 5-7, however the same was not available in the question, so I have used the formulas which I used. If you have it then please provide me, I will make the necessary changes
    Revised Pro Forma Income Statement
    For 2004
    Particulars    Amount
    Sales (1,000,000 units @ $30 per unit).........................    $30,000,000
    – Fixed costs*...............................................................    $5,800,000
    – Total variable costs (1,000,000 units @ $18.80 per unit)    $18,800,000
    Operating income (EBIT)..............................................    $5,400,000
    – Interest (10.75% x $12,000,000)...............................    $1,290,000
    Earnings before taxes....................................................    $4,110,000
    – Taxes (35%)...............................................................    $1,438,500
    Earnings after taxes.......................................................    $2,671,500
    Shares...........................................................................    $2,320,000
    Earnings per share.........................................................    $          1.15
    * Fixed costs include $2,800,000 in depreciation
    Part 2
    The primary reason for change in Earning per share is that the variable cost of Genuine Motor has decreased immensely, despite the same level of sales units. Variable Cost is decreased by $6,200,000 and increase in the Fixed Cost is only $2,800,000, resulting increasing the operating profit by $3,400,000 and correspondingly increases the net income. The number of Common Stock has also increased but the increase in Net Income is at a higher rate than the increase in the number of shares. Hence, Earning Per Share is increased.
    Part 3
    Degree of Operating Leverage (DOL)    Contribution
        EBIT
    Degree...