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Chapter 3 Problem 2 Kirby Engineering provides consulting services to city water authorities. A recent...

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Accounting

Chapter 3 Problem 2

Kirby 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 firms income tax rate is 35%.

Calculate the firms break even volume of service revenue

How much before tax income must the firm earn to make an after tax net income of $100,000 (solve independent of the problem above to better understand before tax income)?

What level of revenue must the firm generate to earn an after tax net income of $100,000?

Suppose the firms income tax rate rises to 40%. What will happen to the break even level of consulting revenue (critical thinking, do you understand the breakeven calculation)?

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