Question

In 2018, X Company sold 5,000 units of its only product for $35.40 each. Unit costs...

In 2018, X Company sold 5,000 units of its only product for $35.40 each. Unit costs were as follows:

Variable manufacturing $14.60
Fixed manufacturing 3.28
Variable selling 4.61
Fixed selling 3.16
Total 25.65


In 2019, the selling price, variable costs per unit, and total fixed costs are not expected to change. Assuming a tax rate of 35%, how many units must X Company sell in 2019 in order to earn $43,000 after taxes?

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Answer #1

ANSWER

Contribution = Selling price - Variable manufacturing and selling cost

= $35.40 -$14.60-$4.61

= $16.19

Fixed cost = 5,000 x (3.28+3.16)

=$32,200

Target profit require after tax = $43,000

Target profit before tax = $43,000 /(1-0.35) = $66,153.84

unit required for target profit = ($66,153.84+$32,200)/16.19

= 6,075 units

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