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Liliac Company sells a single product. The selling price of the product is $300 per unit....

Liliac Company sells a single product. The selling price of the product is $300 per unit. Variable cost is $180 per unit. Fixed cost is $360,000 per period. Currently, the company is selling 5,000 units of the product.

Assume that the income tax rate is 20%. If the company wants to make a profit of $480,000 after tax, how many units of the products should be sold?

A.

5,500 units
B.

6,000 units
C.

7,000 units
D.

8,000 units
Business   Accounting   
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Homework Answers

Answer #1

Answer : D = 8,000 Units

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

>> Unit Contribution margin = $ 300 - $ 180

>> Unit Contribution margin = $ 120.

>> Income before tax = $ 480,000 / ( 100 - 20 ) %

>> Income before tax= $ 600,000.

>> Target Sales units = ( Fixed cost + Desired profit ) / Unit Contribution margin

>> Target Sales units = ( $ 360,000 + $ 600,000 ) / $ 120

>> Target Sales units = 8,000 Units

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