In 2018, X Company's profits after taxes were $162,000. In 2019, the selling price is expected...
In 2018, X Company's profits after taxes were $162,000. In 2019, the selling price is expected to be $42.50, the variable cost per unit is expected to be $24.40, and total fixed costs are expected to be $170,000. Assuming a tax rate of 40%, how many units must X Company sell in 2019 in order to earn profit of $175,000?
Homework Answers
Answer:
| PROFIT BEFORE TAX (TARGET PROFIT)= | PROFIT AFTER TAX / (1 - TAX RATE) |
| $175,000 / (1 - 40%) | |
| $291,666.67 | |
| BREAK EVEN POINT TO EARN TARGET PROFIT = | (FIXED COST + TARGET PROFIT) / CONTRIBUTION MARGIN |
| ($170,000 +$ 291,666.67) / ($42.50 - $24.40) | |
| 25,506.45 UNIT |
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