Strongsville Company wishes to earn after-tax net income of $18,000.Total fixed costs are $84,000, and the contribution margin per unit is $6.00.Strongsville's tax rate is 40%.The number of units that must be sold to earn the targeted net income is _____.
A)14,000 units
B)17,000 units
C)19,000 units
D)21,500 units

Question

Quizplus · Accepted Answer

To achieve an after-tax net income of $18,000 with a tax rate of 40%, the before-tax income needed is $18,000 / (1 - 0.40) = $30,000. Adding the fixed costs of $84,000, the total required contribution is $114,000. Dividing this by the contribution margin per unit of $6.00 gives the number of units needed to be sold: $114,000 / $6.00 = 19,000 units.

Strongsville Company Wishes to Earn After-Tax Net Income of $18,000