Question

For the most recent year, Triad Company had fixed costs of $190,000 and variable costs of 75% of total sales revenue, earned $58,500 of net income after taxes, and had an income tax rate of 35%.
a) Determine the before-tax income.

b) Determine the total contrubution margin

c) Determine the total Sales

d) Determine the breakeven point in dollar sales

Answer 1

Answer:

The computations are as follows

Explanation:

a)  Before tax income  is

 = After Tax Income ÷ (1 - Tax Rate)

= $58,500 ÷ (1 - 0.35)

= $90,000

b) Total Contribution Margin

Contribution Margin = Fixed Costs + Before Tax Income

= $190,000 + $90,000

= $280,000

c) Calculation of Total Sales

Variable Cost is 75% of Sales

SO, Contribution Margin 25% of Sales

Contribution Margin = $280,000

25% of Sales = $280,000

Sales = $280,000 ÷ 25%

         = $1,120,000

d) Break Even Point in dollars

Break Even Point in dollar = Total Fixed Costs ÷ Contribution Margin percentage

= $190,000 ÷ 25%  

= $760,000

We simply applied the above formula