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In 2018, X Company sold 5,500 units of its only product for $35.00 each. Unit costs...

In 2018, X Company sold 5,500 units of its only product for $35.00 each. Unit costs were as follows: Variable manufacturing $15.60 Fixed manufacturing 3.41 Variable selling 4.73 Fixed selling 3.49 Total 27.23 In 2019, the selling price, variable costs per unit, and total fixed costs are not expected to change. Assuming a tax rate of 40%, how many units must X Company sell in 2019 in order to earn $40,000 after taxes?

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Answer #1

ANSWER

Contribution = Selling price - Variable manufacturing and selling cost

= $35.00 -$15.60 -$4.73

= $14.67

Fixed cost = 5,500 x (3.41 +3.49 )

=$37,950

Target profit require after tax = $40,000

Target profit before tax = $40,000 /(1-.40) = $66,666.67

unit required for target profit = ($66,666.67+$37,950)/14.67

= 7,131 units

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