SOLUTION: . (Fixed costs and the break-even point) Dot�s Quik-Stop Party Store expects to earn $40,000 next year after taxes. Sales will be $400,000. The store is located near the fraternity

Question 457186: . (Fixed costs and the break-even point) Dot�s Quik-Stop Party Store expects to earn $40,000 next year after taxes. Sales will be $400,000. The store is located near the fraternity-row district of Cambridge Springs State University and sells only kegs of beer for $20 a keg. The variable cost per keg is $8. The store experiences a 40 percent tax rate.
A. What are the Party Store�s fixed costs expected to be next year?

B. Calculate the firm�s break-even point in both units and dollars.

Answer by amoresroy(361) (Show Source): You can put this solution on YOUR website!
Fixed Cost = Gross Profit - Taxable Income
Where:
Gross Taxable Income = 40,000/0.6 = 66,666.67
and
Gross Profit = Sales * Gross Profit Margin
= 400,000 * (12/20)
= 240,000
A. Fixed Cost = 240,000 - 66,666.67
= 173,333.33
Break-even point
Gross Profit = Fixed Cost
Let y = the firm's break-even point in units
20y = the firm's break-even point in dollars
Gross Profit = y * profit per unit
= y(20-8)
= 12y
12y = 173,333.33
y = 14,445
20y = 288,900
B. The firm's break-even point is 14,445 kegs, $288,900 in dollar sales
RELATED QUESTIONS
You expects R8 400 000 in the coming year,your tractor tires sells R14000 each and the... (answered by solver91311)

A firms marketing manager believes that total sales for the firm next year can be modeled (answered by Boreal)

The Paduka Shoe Company sells five different styles of ladies chappals with identical... (answered by ikleyn)

Finance Example � Break Even Analysis. The break even point for a business is given by... (answered by venugopalramana)

The Hartnett Corporation manufactures baseball bats with Sammy Sosa's autograph stamped... (answered by rfer)

. Finance Example � Break Even Analysis. The break even point for a business is given by (answered by venugopalramana)

The break-even point for a business is given by the formula: B=F/P-V in which B= units... (answered by jojo14344)

An electronics company is planning to introduce a new line of computers. For the first... (answered by lynnlo)