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Capri Incorporated has annual fixed costs totaling $3,000,000 and variable costs of $450 per unit. Each...

Capri Incorporated has annual fixed costs totaling $3,000,000 and variable costs of $450 per unit. Each unit of product is sold for $850. Assume a tax rate of 30 percent. How many sales dollars are required to earn an annual profit of $210,000 after taxes?

$3,898,100

$6,821,250

$7,012,500

$7,862,500

None of the answer choices is correct.

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Answer #1

The correct answer is $6,821,250.

Supporting calculations:

Sales dollars required to earn an annual profit of $210,000 after taxes = Total Fixed Costs + Desired Profit / Contribution Margin Ratio

Contribution Margin Ratio = Contribution Margin / Sales * 100

Contribution Margin = Sales per unit - Variable costs per unit

= $850 per unit - $450 per unit

= $400 per unit

Contribution Margin Ratio = $400 per unit / $850 per unit * 100

= 0.470588235

Sales dollars required to earn an annual profit of $210,000 after taxes = ($3,000,000 + $210,000) / 0.470588235

= $6,821,250

Therefore, the sales dollars required to earn $210,000 profit after tax is $6,821,250.

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