Computation of Break even volume of service revenue.
Aqua Systems Engineering provides consulting services to city water authorities. A recent income statement revealed variable costs of $740.000 on a sales level of $1,000,000. Annual fixed expenses are $200,000, and the firm's income tax rate is 35 percent.
Required
a. Calculate the firm's break-even volume of service revenue.
b. How much before-tax income must the firm earn to make an after-tax net income of $100,000?
c. What level of revenue must the firm generate to earn an after-tax net income of $100,000?
d. Suppose the firm's income tax rate rises to 40 percent. What will happen to the break-even level of consulting revenue?