Break-even analysis Krista's Beautiques sells its merchandise at three boutiques lo- cated in department stores. Last month sales were $10,000 and profit was 8 percent of sales. Fixed costs were $1,700. The company's tax rate is 30 percent on its taxable income.

The locations of the boutiques have become less desirable recently and the merchandise less appealing to the kind of shoppers frequenting the department stores. If the boutiques are replaced by door-to-door selling, it is estimated that sales would increase 25 percent and profit would increase $200 per month. Fixed costs are expected to decrease to $1,000 because operations could be moved to a low-rent facility. Variable costs are also expected to change.

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REQUIRED a. Calculate the break-even point for last month under the old operations. b. Calculate the break-even point expected with the new method of operations. c. What level of sales is required with the new operations in order to earn as much after-tax profit as last month? d. Calculate the margin of safety for the old and new methods of operations.