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