Carla Company, which is subject to a 40% income tax rate, projected its income before taxes...

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Carla Company, which is subject to a 40% income tax rate, projected its income before taxes...

Carla Company, which is subject to a 40% income tax rate, projected its income before taxes for next year as shown here:

Sales (184,000 units)		$9,200,000
Cost of sales
	Variable costs	2,300,000
	Fixed costs	3,450,000
Pretax earning		$3,450,000

If Carla wants after-tax earnings of 30% of sales, what is the required level of sales in dollars and in units?

Revenue:

$

or

units

business accounting

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Answer 1

Answer #1

Desired after tax earnings = 30% of Sales

Before tax = 30% of Sales/(1-tax rate)

= 30% of Sales/(1-40%)

= 50% of Sales

Sales - variable costs - fixed costs = Pretax earnings

Sales - 25% of Sales - 3,450,000 = 50% of Sales

Sales = 3,450,000/25%

= $13,800,000

Hence, required revenue = $13,800,000

in Units = 13,800,000/50 = 276000 units

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Answer 2

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Carla Company, which is subject to a 40% income tax rate, projected its income before taxes...

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