E16-19

E 16-19: Product Planning with Taxes 2 Assume that last year, Cliff Consulting, a firm in Berkley, CA, had the following contribution income statement: 3 CLIFF CONSULTING Contribution Income Statement For the Year Ended September 30 5 Sales Revenue $1,200,000 Variable Costs Cost of Services $480,000 Selling & Adminstrative 60,000 540,000 10 Contribution Margin 660,000 11 Fixed costs- Selling & Admin 440,000 12 Before-tax profit 220,000 13 Income taxes 21% 46,200 14 After-tax profit $173,800 15 16 17 A. Determine the annual break-even point in sales revenue 18 B. Determine the annual margin of safety in sales revenue 19 C. What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $80,000? 20