Reference no: EM132990222

Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement:

CLIFF CONSULTING

Contribution Income Statement

For the Year Ended September 30

Sales revenue $1,200,000

Variable costs

Costs of Services $480,000

Selling and administrative $60,000 $540,000

Contribution margin $660,000

Fixed Costs-selling and administrative $440,000

Before- tax profit $220,000

Income-taxes (21%) $46,200

After- tax profits $173,800

Problem (a) Determine the annual break-even point in sales revenue.

Problem (b) Determine the annual margin of safety in sales revenue.

Problem (c) What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $80,000?

Problem (d) With the current cost structure, including fixed costs of $440,000, what dollar sales revenue is required to provide an after-tax net income of $250,000?Use rounded contribution margin (2 decimal places) for calculation. Round your answer up to the nearest dollar.

Problem (e) Prepare an abbreviated contribution income statement to verify that the solution to requirement (d) will provide the desired after-tax income.