Question: CVP analysis, income taxes. Westover Motors is a small car dealership. On average, it sells a car for $32,000, which it purchases from the manufacturer for $28,000. Each month, Westover Motors pays $53,700 in rent and utilities and $69,000 for salespeople's salaries. In addition to their salaries, salespeople are paid a commission of $400 for each car they sell. Westover Motors also spends $10,500 each month for local advertisements. Its tax rate is 40%.
1. How many cars must Westover Motors sell each month to break even?
2. Westover Motors has a target monthly net income of $69,120. What is its target monthly operating income? How many cars must be sold each month to reach the target monthly net income of $69,120?