Question

Tulip Makers manufactures espresso machines. Their profit formula is P = 150(X) - 80(X) - 420,000.

How many units would they need to sell to make an after tax profit of $500,000? (Assume the tax rate is 15% and that the answer is within the relevant range.)

(Use commas, no decimals)

Answer 1

Calculation of no.of units need to be sold to make an after tax profit of $500,000
Before tax profit = After tax profit / (1-Tax rate) = $500000/(1-0.15) = $5,88,235
No.of units need to be sold = [Fixed Cost + Before tax profit] / [Selling price per unit - Variable cost per unit]
Fixed cost = $4,20,000
Selling price per unit = $150
Variable cost per unit = $80
No.of units need to be sold = [$420000 + $588235] / [$150 - $80]
No.of units need to be sold = 14,403 units