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Exercise 3-6 Carla Vista Machine Works produces soft serve ice cream freezers. The freezers sell for...

Exercise 3-6

Carla Vista Machine Works produces soft serve ice cream freezers. The freezers sell for $16,500, and variable costs total $12,400 per unit. Carla Vista incurs $26,330,000 in fixed costs during the year. The company’s tax rate is 29%.

How many freezers must Carla Vista sell to generate net income of $7,765,000? (Round answer to 0 decimal places, e.g. 5,275.)

freezers
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Answer #1

Ans

Let X be the number of freezers to generate a net income of 7765000

Total Sales = 16500X

Total Variable costs = 12400X

Total Contribution = 4100X

Fixed Cost = 26330000

Income Before taxes = 4100X - 26330000

Taxes is 29%. Therefore net income is 71%

Net Income = 7765000 = (4100X - 26330000) * 71%

=2911X-18694300

7765000 = 2911X-18694300

2911X = 18694300+7765000

2911X = 26459300

X = 26459300/2911

= 9089

Number of freezers to generate a net income of 7765000 = 9089

Verification

Total contribution = 4100*9089 = 37264900

Less Fixed cost = 26330000

Income before taxes = 10934900

Less taxes @ 29% = 3171121

Net Income = 7763779

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