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.