# Break-Even Analysis of Operating Statistics

High School Traditions operates a shop that makes and sells class rings for local high schools. Operating statistics follow:

Average selling price per ring $250

Variable costs per ring:

Rings and stones $ 90

Sales commissions 18

Variable overhead 8

Annual fixed cost:

Selling expenses $42,000

Administrative expenses 56,000

Production 30,000

The company's tax rate is 30 percent.

Required:

1. What is the firm's break-even point in rings? In revenue?

2. How much revenue is needed to yield $140,000 before-tax income?

3. How much revenue is needed to yield an after-tax income of $120,000?

4. How much revenue is needed to yield an after-tax income of 20 percent of revenue?

5. The firm's marketing manager believes that by spending an additional $12,000 in advertising and lowering the price by $20 per ring, he can increase the number of rings sold by 25%. He is currently selling 2,200 rings. Should he make these changes? Show proof.

https://brainmass.com/business/financial-ratios/break-even-analysis-operating-statistics-146735

#### Solution Summary

This solution shows step-by-step calculations to determine the break-even point, the required revenue, and the effects of spending more money of advertising and lowering prices. All formulas are shown in an Excel file.