Problem 12-4 Leverage Analysis: You have developed the following income statement for your corporation. It represents the most recent year’s operations, which ended yesterday.
Variable costs 22,800,000
Revenue before Fixed costs $22,950,000
Fixed Costs 9,200,000
Interest Expense 1,350,000
Earnings Before Taxes $12,400,000
Taxes @ 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 percent would earnings before taxes (and net income) increase?