Exercise 7-33

Power Grid Engineering Associates, Inc. provides consulting services to commercial electric utilities. The consulting firm’s contribution-margin ratio is 15% and its annual fixed expenses are $285,000. The firm’s income tax rate is 30%.

Required:

1. Calculate the firm’s break-even volume of service revenue.

2. How much before tax income must the firm earn to make an after tax net income of $154,000?

3. What level of revenue for consulting services must the firm generate to earn an after tax net income of $154,000?…