The following information pertains to Marvolo, Inc. What is the sales volume (in units) required to...
The following information pertains to Marvolo, Inc. What is the sales volume (in units) required to obtain a target AFTER-TAX profit of $108,000?
|
Selling price per unit |
$100 |
|
Variable costs per unit |
$75 |
|
Total fixed costs |
$425,000 |
|
Tax rate |
40% |
Homework Answers
Contribution margin=Sales-Variable cost
=100-75=$25 per unit
Target before tax profits=108,000/(1-tax rate)
=108,000/(1-0.4)=$180,000
Target Contribution margin=Target profits+Fixed costs
=(425,000+180,000)=$605,000
Hence target sales=605,000/25
=24200 units
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