Question

In 2018, X Company sold 6,800 units of its only product for $36.80 each. Unit costs...

In 2018, X Company sold 6,800 units of its only product for $36.80 each. Unit costs were as follows:

Variable manufacturing $15.90
Fixed manufacturing 2.53
Variable selling 5.46
Fixed selling 2.50
Total 26.39


In 2019, the selling price, variable costs per unit, and total fixed costs are not expected to change. Assuming a tax rate of 34%, how many units must X Company sell in 2019 in order to earn $41,000 after taxes?

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Answer #1

Total fixed costs = ($2.53 + $2.50) * 6,800 units = $34,204

Selling price per unit = $36.80
Less: Variable costs per unit ($15.90 + $5.46) = $21.36
Contribution margin per unit = $15.44

No. of units X Company must sell in order to earn $41,000
Required profit after tax = $41,000
Profit before tax ($41,000 / (1 - 0.34)) = $62,121.21
Add: Fixed costs = $34,204
Required contribution margin = $96,325.21

No..of units to be sold for profit of $41,000 = Required contribution margin / Contribution margin per unit
= $96,325.21 / $15.44
= 6,238.68 units or 6,239 units rounded off.

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