Head-Gear Company produces helmets for bicycle racing. Currently, Head-Gear charges a price of $230 per helmet. Variable costs are $80.50 per helmet, and fixed costs are $1,255,800. The tax rate is 25 percent. Last year, 14,000 helmets were sold.
1. What is Head-Gear’s net income for last year?
2. What is Head-Gear’s break-even revenue?
3. Suppose Head-Gear wants to earn before-tax operating income of $900,000. How many units must be sold?
4. Suppose Head-Gear wants to earn after-tax net income of $650,000. How many units must be sold?
5. Suppose the income tax rate rises to 35 percent. How many units must be sold for HeadGear to earn after-tax income of $650,000?