In 2019, X Company's profit function was 0.30R - $88,300, where R is revenue. In 2020,...

Question

Question

In 2019, X Companys profit function was 0.30R - $88,300, where R is revenue. In 2020, the relationship between revenue and v

Answer 1

Answer #1

Tax rate = 30%

Profit after tax = $35,000

Profit before tax = Profit after tax/ (1- tax rate)

= 35,000/ (1-0.30)

= 35,000/0.7

= $50,000

Increase in fixed cost = $15,894

In the profit function, 0.30R - $88,300, $88,300 is the fixed cost.

fixed cost will become = 88,300+15,894

= $104,194

Profit function = 0.30R - 104,194

50,000 = 0.30R - 104,194

R = 513,980

Hence, revenue of $513,980 is needed to earn profit of $35,000 after taxes.

Kindly comment if you need further assistance. Thanks‼!

Answer 2

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