Question
1.[Survival Revenues Breakeven] During its first year of operations, the SubRay Corporation produced the following income statement results: Net Sales$300,000 Cost of Goods Sold-180,000 Gross
1.[Survival Revenues Breakeven] During its first year of operations, the SubRay Corporation produced the following income statement results: Net Sales$300,000 Cost of Goods Sold-180,000 Gross Profit120,000 General & Administrative-60,000 Marketing expenses-60,000 Depreciation-20,000 EBIT-20,000 Interest expenses-10,000 Earnings before taxes-30,000 Income taxes-0 Net earnings (loss)$-30,000 Costs of goods sold are expected to vary with sales and be a constant percentage of sales.The general and administrative employees have been hired and are expected to remain a fixed cost. Marketing expenses are also expected to remain fixed since the current sales staff members are expected to remain on fixed salaries and no new hires are planned.The effective tax rate is expected to be 30 percent for a profitable firm. A.Estimate the survival or EBDAT breakeven amount in terms of survival revenues necessary for the SubRay Corporation to breakeven next year. View full document
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