Question

The following data is for the Rose Company, a manufacturer of cat beds: After-tax income $...

The following data is for the Rose Company, a manufacturer of cat beds: After-tax income $ 116140 Selling price per unit $ 3.11 Variable cost per unit $ 1.30 Total fixed costs $ 128877 If Rose sold 282945 units, what is the income tax rate?

Select one: a. 50% b. 69.70% c. 90.12% d. 22.68%

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Homework Answers

Answer #1

Option (b) is correct

First we will calculate Earnings before taxes as per below:

Earnings before taxes = Sales - Variable cost - Fixed cost

Given:

Sales = $3.11 * 282945 = $879958.95

Variable cost = $1.30 * 282945 = $367828.5

Fixed cost = $128877

Putting the values in the above earnings before taxes formula, we get,

Earnings befotre taxes = $879958.95 - $367828.5 - $128877

Earnings before taxes = $383253.45

Next, we will calculate the amount of taxes as per below:

After tax income = Earnings befor taxes - Taxes

$116140 = $383253.45 - Taxes

Taxes = $383253.45 - $116140

Taxes = $267113.45

Now,

Tax rate = Taxes / Earnings before taxes * 100

Putting the values in the above formula, we get,

Tax rate = $267113.45 / $383253.45 * 100

Tax rate = 69.70%

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