Question

Designer Jackets, Inc. produces blazers and has the following data available on these products. Sales price per unit $ 280 Variable cost per unit 120 Fixed costs per month 16,000 Tax rate 20 percent (1) How many units must be sold to earn a monthly profit of $150,000 after taxes? (2) How many sales dollars are required to earn a monthly profit of $150,000 after taxes? SHOW YOUR WORK HTML Editore BIŲ A-A-I EX3 - O P NV G O , E E 12pt TT Paragraph

Answer 1

Selling price per unit = $280

Variable cost per unit = $120

Contribution margin per unit = Selling price per unit - Variable cost per unit

= 280-120

= $160

Contribution margin ratio = Contribution margin per unit / Selling price per unit

= 160/280

= 57.143%

Fixed cost = $1,600

Tax = 20%

Profit after tax = $150,000

Profit before tax = Profit after tax / (1- tax rate)

= 150,000/(1-0.20)

= 150,000/0.80

= $187,500

i) Number of units to be sold to earn, target profit = ( fixed cost + Target profit)/Contribution margin per unit

= (16,000+187,500)/160

= 1,272 units

(ii) Sales dollar to earn target profit = ( Fixed cost + target profit)/ Contribution margin ratio

= ( 16,000+187,500)/57.143%

= 203,500/57.143%

= $356,124

Kindly comment if you need further assistance.

Thanks‼!