Simone is a staff accountant for a local factory and has been asked to gather data and perform some analysis by the end of the week for the annual financial performance review. She compiled the following information: Assume that expenses do not include depreciation, amortization, or interest. What is the difference between earnings before interest and taxes (EBIT) for Years 1 and 2?
A)$36,490 decrease
B) $51,490 increase
C) $54,506 decrease
D) $54,506 increase

Question

Simone is a staff accountant for a local factory and has been asked to gather data and perform some analysis by the end of the week for the annual financial performance review. She compiled the following information:  Assume that expenses do not include depreciation, amortization, or interest. What is the difference between earnings before interest and taxes (EBIT) for Years 1 and 2?
A)$36,490 decrease 
B) $51,490 increase 
C) $54,506 decrease 
D) $54,506 increase

Quizplus · Accepted Answer

This question requires familiarity with the calculation of EBIT: Sales - Expenses - Depreciation - Amortization. EBIT, Year 1 = $1,256,002 - $883,458 - $82,344 - $9,002 = $281,198. EBIT, Year 2 = $1,439,754 - $993,200 - $100,420 - $10,430 = $335,704. The difference is ($335,704 - $281,198) = $54,506 Increase (Choice D).

Simone Is a Staff Accountant for a Local Factory and Has