You have developed the following income statement for the Hugo Boss Corporation. It represents the most recent year's operations, which ended yesterday.
Sales
$ 50,439,375
Variable costs
(25,137,000)
Revenue before fixed costs
$ 25,302,375
Fixed costs
(10,143,000)
EBIT
$ 15,159,375
Interest expense
(1,488,375)
Earnings before taxes
$ 13,671,000
Taxes at 50%
(6,835,500)
Net income
$ 6,835,500
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 30 percent, by what percent would earnings before taxes (and net income) increase?