Effect of taxes on break-even and target volume
Fargo Products Inc., desires an after-tax income of $500,000. It has fixed costs of $2,500,000, a unit sales price of $300, and unit variable costs of $150, and is in the 40% tax bracket.
Required:
1. What amount of pre-tax income is needed to earn an aftertax income of $500,000?
2. What target volume sales revenue must be reached to earn the $500,000 after-tax income?
3. Assuming that this is a single-product firm, how many units must be sold to earn the after-tax income of $500,000?
4. What target volume sales revenue would have been needed to achieve the $500,000 of income had no income tax existed?
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