Question

Sales	​$50,063,085
Variable costs	(28,483,000)
Revenue before fixed costs	​$21,580,085
Fixed costs	(15,457,000)
EBIT	​$6,123,085
Interest expense	(1,337,331)
Earnings before taxes	​$4,785,754
Taxes at %50%	(2,392,877)
Net income	$2,392,877

(​

Break-even

analysis​)

You have developed the income statement in the popup​ window,

​, for the Hugo Boss Corporation. It represents the most recent​ year's operations, which ended yesterday. 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

20

​percent, by what percent would earnings before taxes​ (and net​ income) increase?

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

​$   

​(Round to the nearest​ dollar.)

Answer 1

1.
Firm's break-even point in sales dollars=(15457000+1337331)/(1-28483000/50063085)=38960737.1969

2.
% increase in EBIT=(50063085*1.1-28483000*1.1-15457000)/6123085-1=35.244%

% increase in Net Income=(50063085*1.1-28483000*1.1-15457000-1337331)*(1-50%)/2392877-1=45.092%