Required: 1. Determine the company’s current fixed costs. 2. Determine the company’s new break-even point in sales. 3. After the purchase of the equipment, how much revenue does the company need to generate a profit of $120,000?
Required: 1. Determine the company’s current fixed costs. 2. Determine the company’s new break-even point in sales. 3. After the purchase of the equipment, how much revenue does the company need to generate a profit of $120,000?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Tommy’s Tile Service is planning on purchasing new tile cleaning equipment that will improve their ability to remove tough stains from ceramic tiles. The company’s contribution margin is 25% and its current break-even point is $409,200 in sales revenue. Purchasing the new equipment will increase fixed costs by $9,500.
Required:
1. Determine the company’s current fixed costs.
2. Determine the company’s new break-even point in sales.
3. After the purchase of the equipment, how much revenue does the company need to generate a profit of $120,000?
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