Acc206 Principles of Accounting: P19-33 Draper Consulting provides consulting service

Acc206 Principles of Accounting
P19-33 Computing breakeven sales and sales needed to earn a target operating income; sensitivity analysis [30-45 min]
This problem continues the Draper Consulting, Inc., situation from Problem 18-37 of Chapter 18.

Draper Consulting provides consulting service at an average price of $175 per hour and incurs variable costs of $100 per hour. Assume average fixed costs are $5,250 a month.

Requirements:
1. What is the number of hours that must be billed to reach break even?
2. If Draper desires to make a profit of $3,000, how many consulting hours must be completed?
3. Draper thinks it can reduce fixed costs to $3,990 per month, but variable cost will increase to $105 per hour. What is the new break even in hours?
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