12-4 Leverage analysis

12-4 (Leverage analysis) You have developed the following income
statement for your corporations. It represents the most recent year’s
operations, which ended yesterday.

Sales $45,750,000
Variable costs 22,800.000
Revenue before fixed costs $22,950,000
Fixed costs 9,200,000
EBT $13,750,000
Interest expense 1,350,000
Earnings before taxes $12,400,000
Taxes at 50% 6,200,000
Net Income $6,200,000

Your
supervisor in the controller’s office has just handed you a memorandum
asking for written responses to the following questions:

a. What if the firm’s break-even point in sales dollars?

b. If sales should increase by 25 percent, by what percent would earnings before taxes (and net income increase?