Question

# 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

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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