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# Break-Even Analysis of Operating Statistics

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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
Annual fixed cost:
Selling expenses \$42,000
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.