In 2019, X Company's profit function was 0.36R - $86,900, where R is revenue. In 2020, the relationship between revenue and variable costs will not change, but fixed costs will decrease by $19,987. Assuming a tax rate of 40%, what will revenue have to be in order for X Company to earn $35,200 after taxes in 2020?
Variable cost changes with changes in Revenue while fixed cost remains constant.
Desired income after taxes= $35,200
Desired income before taxes = 35200/(1-40%) = $58,666.67
Add: Fixed costs = 86900-19987 = $66,913
Desired contribution margin = $125,579.67
Hence, required revenue = 125,579.67/0.36
= $348,832.42
In 2019, X Company's profit function was 0.36R - $86,900, where R is revenue. In 2020,...
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