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Power Grid Engineering Associates, Inc., provides consulting services to commercial electric utilities. The consulting firm's contribution-margin ratio is 30 percent, and its annual fixed expenses are $240,000. The firm's income-tax rate is 45 percent.

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 $136,000? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

3.What level of revenue for consulting services must the firm generate to earn an after-tax net income of $136,000? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

4.Suppose the firm's income-tax rate declines to 35 percent. What will happen to the break-even level of consulting service revenue?

  • The break-even level of consulting service revenue will not change.
  • The break-even level of consulting service revenue will increase.
  • The break-even level of consulting service revenue will decrease.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9800455

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