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In 2018, X Company's profits after taxes were $162,000. In 2019, the selling price is expected...

In 2018, X Company's profits after taxes were $162,000. In 2019, the selling price is expected to be $42.50, the variable cost per unit is expected to be $24.40, and total fixed costs are expected to be $170,000. Assuming a tax rate of 40%, how many units must X Company sell in 2019 in order to earn profit of $175,000?

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Answer #1

Answer:

PROFIT BEFORE TAX (TARGET PROFIT)= PROFIT AFTER TAX / (1 - TAX RATE)
$175,000 / (1 - 40%)
$291,666.67
BREAK EVEN POINT TO EARN TARGET PROFIT = (FIXED COST + TARGET PROFIT) / CONTRIBUTION MARGIN
($170,000 +$ 291,666.67) / ($42.50 - $24.40)
25,506.45 UNIT
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