(Formula; graph; income statement) Lou & Art Inc. had the following income statement for 2007.

a. Compute the break-even point using the equation approach.

b. Prepare a CVP graph to reflect the relationships among costs, revenues, profit, and volume.

c. Prepare a profit-volume graph.

d. Prepare a short explanation for company management about each of the graphs.

e. Prepare an income statement at break-even point using variable costing.

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Sales (30,000 gallons @ $4). Variable costs Production (40,000 gallons @ $1.50) $60,000 Selling (40,000 gallons @ $0.25) 10,000 Contribution margin Fixed costs Production Selling and administrative Income before tax Income tax (40%) Net income $23,000 3,100 $120,000 (70,000) $ 50,000 (26,100) $ 23,900 (9,560) $ 14,340