Hydro Systems Engineering Associates, Inc., provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 15 percent, and its annual fixed expenses are $245,000. The firm’s income-tax rate is 30 percent. Required: 1. Calculate the firm’s break-even volume of service revenue. 2. How much before-tax income must the firm earn to make an after-tax net income of $138,000? 3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $138,000? 4. Suppose the firm’s income-tax rate changes to 20 percent. What will happen to the break-even level
Hydro Systems Engineering Associates, Inc., provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 15 percent, and its annual fixed expenses are $245,000. The firm’s income-tax rate is 30 percent.
Required:
1. Calculate the firm’s break-even volume of service revenue.
2. How much before-tax income must the firm earn to make an after-tax net income of $138,000?
3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $138,000?
4. Suppose the firm’s income-tax rate changes to 20 percent. What will happen to the break-even level of consulting service revenue?
Calculate the firm’s break-even volume of service revenue. How much before-tax income must the firm earn to make an after-tax net income of $138,000? What level of revenue for consulting services must the firm generate to earn an after-tax net income of $138,000? (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)
Break-even volume $1,633,333
Before tax income $197,142
Service revenue ?????
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
