Coronado, Inc. wants to sell a sufficient quantity of products to earn an after-tax profit of...
Coronado, Inc. wants to sell a sufficient quantity of products to earn an after-tax profit of $27000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $79000, how many units must be sold to earn income of $27000? Coronado, Inc. has a tax rate of 40%.
| 62000 units |
| 63600 units |
| 39500 units |
| 94800 units |
Homework Answers
Before Tax Profit = After Tax Profit / (1- Tax Rate)
= $ 27,000 / (1- 40%)
= $ 45,000
Contribution Margin Per Unit = Selling Price Per Unit- Variabke Cost Per unit
= $ 10 - $ 8
= $ 2 Per Unit
Required Contribution Margin = total fixed costs + Before tax profit
= $79,000 + $ 45,000
= $ 124,000
The units must be sold to earn income of $27000= Required Contribution Margin / Contribution Margin Per Unit
= $ 124,000 / $ 2 Per Unit
= 62,000 Units
Hence the correct answer is 62000 units
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After-Tax Profit Targets
Olivian Company wants to earn $360,000 in net (after-tax) income
next year. Its product is priced at $400 per unit. Product costs
include:
Direct materials
$120.00
Direct labor
$88.00
Variable overhead
$20.00
Total fixed factory overhead
$440,000
Variable selling expense is $16 per unit; fixed selling and
administrative expense totals $290,000. Olivian has a tax rate of
40 percent.
Required:
1. Calculate the before-tax profit needed to
achieve an after-tax target of $360,000....
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Variable overhead
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