Hydro Systems Engineering Associates. Inc. provides consulting services to city water authorities. The consulting firm’ s contribution-margin ratio is 20 percent. and its annual fixed expenses are $120,000. The firm’ s income-tax rate is 40 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 $ 48.000?
3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $ 48.000?
4. Suppose the firm ’s income-tax rate rises to 45 percent. What will happen to the break-even level of consulting service revenue?
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