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Net Income Planning Planning Holland Corporation earned an after-tax net income of $240,000 last year. Fixed costs were $1,200,000. The selling price per unit of its product was $120, of which $50 was a contribution to fixed cost and net income. The income tax rate was 40%. a. How many units of product were sold last year? 0 units b. What was the break-even point in units last year? 0 units C. The company wishes to increase its after-tax net income by 20% this year. If selling prices and the income tax rate remain unchanged, how many units must be sold? units Check

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Answer #1
Req a.
After tax net income 240000
Add: tax (240000/60*40) 160000
Before tax Net income 400000
Add: Fixed cost 1200000
Total contribution 1600000
Divide: Contribution Per unit 50
Number of units sold 32000
Req b:
Break even units:
Fixed cost 1200000
Divide: CM per unit 50
Break even units: 24000
Req c:
After Tax income of last year 240000
Add: Desired increase (240000*20%) 48000
Desired After tax Income0 288000
Add: Tax (288000/60*40) 192000
Desired Before tax Income 480000
Add: fixed cost 1200000
Desired Contribution 1680000
Divide: CM per unit 50
Number of units to be sold next year 33600
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