Computing breakeven sales and sales needed to earn a target operating income; sensitivity analysis
This problem continues the Draper Consulting, Inc., situation from Problem 18-37 of Chapter 18. Draper Consulting provides consulting service at an average price of $175 per hour and incurs variable cost of $100 per hour. Assume average fixed costs are $5,250 a month.
Requirements
1. What is the number of hours that must be billed to reach break even?
2. If Draper desires to make a profit of $3,000, how many consulting hours must be completed?
3. Draper thinks it can reduce fixed cost to $3,990 per month, but variable cost will increase to $105 per hour. What is the new break even in hours?