A sporting goods manufacturer lost $400,000 on sales of $3 million in a year during the last recession. The production lines operated at only 60% of capacity during the year. Variable costs represent one-third of the sales dollars.
a. At what percent of capacity must the firm operate in order to break even?
b. What would its net income be at 80% of capacity?
c. What dollar sales would generate a net income of $700,000?
d. How much does each additional dollar of sales increase the net income?
e. How much does every $1 increase in fixed costs raise the break-even sales?