Power Grid Engineering Associates, Inc._CVP Analysis



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%.


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?


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