What is the firm break-even point in sales dollars

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Reference no: EM131775940

Problem - Leverage analysis: you have developed the following income statement for your corporation. It represents the most recent year's operations, which ended yesterday.

Sales

$45,750,000

Variable costs

22,800,000

Revenue before fixed costs

$22,950,000

Fixed costs

9,200,000

EBIT

$13,750,000

Interest expense

1,350,000

Earnings before taxes

$12,400,000

Taxes at 50%

6,200,000

Net income

$6,200,000

Your supervisor in the controller's office has just handed you a memorandum asking for written responses to the following questions:

a. What is the firm's break-even point in sales dollars?

b. If sales should increase by 25 percent, by what percent would earnings before taxes (and net income) increase?

Reference no: EM131775940

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