E6-17 (Static) Analyzing Break-Even and Target Profit [LO 6-1, 6-2]

Tommys Tile Service is planning on purchasing new tile cleaning equipment that will improve their ability to remove tough stains from ceramic tiles. The companys contribution margin is 30% and its current break-even point is $250,000 in sales revenue. Purchasing the new equipment will increase fixed costs by $7,500.

Required:

1. Determine the companys current fixed costs.

2. Determine the companys new break-even point in sales.

3. After the purchase of the equipment, how much revenue does the company need to generate a profit of $100,000?