You have developed the following income statement for your corporation. It represents the mosr recent year's operations. which ended yesterday.
Sales $45,750,000 Variable costs 22,800,000 Revenue before fixed costs $22,000,000 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 %, by what % would earnings before taxes ( and net income) increase?
Do not forget to show the necessary steps and explain how you attained that outcome.