Question: A manufacturer is considering introducing a new product that will require a $250,000 investment of capital. The necessary funds would be raised through a bank loan at an interest rate of 8%. The fixed operating costs associated with the product would be $122,500, while the contribution margin percentage would be 42%. Assuming a selling price of $15 per unit, determine the number of units (rounded to the nearest whole unit) the manufacturer would have to sell to generate earnings before interest and taxes (EBIT) of 32% of the amount of capital invested in the new product.Analysis: So naturally, what i did is I subtracted the interest amount from EBIT to make it Operating income before tax to calculate the break even sales.EBIT = 80,000 - 20000 = 60,000; However, Hock has directly added the EBIT to Fixed cost to get the break even sales.So, my question here is - is EBIT and operating income same - Which i am pretty sure is not?
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