Compute the break-even point using the equation approach.

(Formula; graph; income statement) Pittsburg Tar Co. had the following income statement for 2010:

Sales (30,000 gallons × $8)		$240,000
Variable cost
Production (40,000 gallons × $3)	$120,000
Selling (30,000 gallons × $0.50)	15,000	(135,000)
Contribution margin		$105,000
Fixed cost
Production	$ 46,000
Selling and administrative	6,200	(52,200)
Income before tax		$ 52,800
Income tax (40%)		(21,120)
Net income		$ 31,680

a. Compute the break-even point using the equation approach.

b. Prepare a CVP graph to reflect the relationships among cost, revenue, profit, and volume.

c. Prepare a profit-volume graph.

d. Prepare a short explanation for company management about each of the graphs.

e. Prepare an income statement at break-even point using variable costing.