CVP Analysis:

Lovely Linen Company sells a number of linen products, including sheets, towels, and tablecloths. The firms fixed costs are $800,000 per year, and its variable costs for all products average 65% of sales. Its tax rate is 40%. Required: a. Calculate the firms break-even point. b. Determine total sales required for the firm to earn an after-tax profit of: $300,000 per year c. Management is considering an increase in advertising of $200,000 per year. Determine total sales required for the firm to earn an after-tax profit of $500,000 per year if advertising costs are increased.