Question

Coronado, Inc. wants to sell a sufficient quantity of products to earn an after-tax profit of $27000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $79000, how many units must be sold to earn income of $27000? Coronado, Inc. has a tax rate of 40%.

62000 units

63600 units

39500 units

94800 units

Answer 1

Before Tax Profit = After Tax Profit / (1- Tax Rate)

= $ 27,000 / (1- 40%)

= $ 45,000

Contribution Margin Per Unit = Selling Price Per Unit- Variabke Cost Per unit

= $ 10 - $ 8

= $ 2 Per Unit

Required Contribution Margin = total fixed costs + Before tax profit

= $79,000 + $ 45,000

= $ 124,000

The units must be sold to earn income of $27000= Required Contribution Margin / Contribution Margin Per Unit

= $ 124,000 / $ 2 Per Unit

= 62,000 Units

Hence the correct answer is 62000 units