Question
[Survival Revenues Breakeven] During its first year of operations, the SubRay Corporation produced the following income statement results: Net Sales: $300,000 Cost of good sold:
[Survival Revenues Breakeven] During its first year of operations, the SubRay Corporation produced the following income statement results:
Net Sales: $300,000
Cost of good sold: 180,000
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Gross Profit: 120,000
General and administrative 60,000
Marketing Expenses: 60,000
Depreciation: 20,000
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EBIT: 20,000
Interest expenses: 10,000
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Earnings before taxes: 30,000
Income taxes: 0
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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 because the current sales staff members are expected to re- main on fixed salaries and no new hires are planned. The effective tax rate is expected to be 30 percent for a profitable firm.
** Estimate the survival or EBDAT breakeven amount in terms of survival revenues necessary for the SubRay Corporation to break even next year.**
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