Pro-Forma Income Statement
For Projected Sales Level of $ 1,500,000
SALES $ 1,500,000
Less: VC (250,000)
Gross Profit $ 1,250,000
Less: FC 1.050,000
EBIT (Operating Profit) $ 200,000
Assume this pro forma income statement reflects the operating cost structure for a new project. What is projected operating breakeven point for the company given the proposed cost structure?
Calculate the company's degree of operating leverage (DOL),
Using the DOL calculation above, what will be the EBIT if Sales come in 10% BELOW the pro-forma projection?
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= Percentage change in EBIT/Percentage change in sales
Or, 6.25 = Percentage change in EBIT/10%,
Or, Percentage change in EBIT = 62.5%...