Problem:
ABC. Corp. has estimated the following income statement for its next fiscal year.
- Sales $20,000,000
- Variable costs 6,000,000
- Revenue before fixed costs 14,000,000
- fixed costs 9,000,000
- EBIT 5,000,000
- Interest expense 900,000
- earnings before taxes 4,100,000
- taxes (35%) 1,435,000
- net income 2,665,000
Required:
Question 1: What is the break even point in sales dollars for the firm?
Question 2: If the average unit cost is $20, what is the break even point in units?
Note: Provide thorough explanation of every question given in the problem.