Question

Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $ 1 comma 000 $1,000, variable costs are $ 800 $800, and fixed costs are $ 120 comma 000 $120,000. How many dresses must the Bridal Shoppe sell to yield after minus −tax net income of $ 22 comma 000 $22,000, assuming the tax rate is 30 30%?

Answer #1

Selling Price per dress = $1,000

Variable Cost per dress = $800

Fixed Costs = $120,000

Contribution Margin per dress = Selling Price per dress -
Variable Cost per dress

Contribution Margin per dress = $1,000 - $800

Contribution Margin per dress = $200

After-tax Net Income = Operating Income * (1 - tax)

$22,000 = Operating Income * (1 - 0.30)

Operating Income = $31,428.57

Required Unit Sales = (Fixed Costs + Operating Income) /
Contribution Margin per dress

Required Unit Sales = ($120,000 + $31,428.57) / $200

Required Unit Sales = $151,428.57 / $200

Required Unit Sales = 757.14

Therefore, the Bridal Shoppe must sell 758 dress to earn a net income of $22,000

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