Assume the following cost information for Marie Company: $\begin{array}{lr}
\text { Selling price per unit } & \$ 144 \
\text { Variable costs per unit } & \$ 80 \
\text { Total fixed costs } & \$ 80,000 \
\text { Tax rate } & 40 \%
\end{array}$ _____ of sales dollars is required to earn an after?tax net income of $24,000.
A)$216,000
B)$252,000
C)$270,000
D)$315,000

Question

Quizplus · Accepted Answer

To find the sales dollars required to earn an after-tax net income of $24,000, first calculate the pre-tax income needed, since the after-tax income is $24,000 and the tax rate is 40%. The formula for this is: Pre-tax income = After-tax income / (1 - Tax rate) = $24,000 / (1 - 0.4) = $24,000 / 0.6 = $40,000. Next, calculate the total required sales to achieve this pre-tax income, considering the fixed costs and the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable costs per unit, which is $144 - $80 = $64. The formula to calculate the required sales is: Required sales = (Total fixed costs + Desired profit before taxes) / Contribution margin per unit = ($80,000 + $40,000) / ($64 / $144) = $120,000 / ($64 / $144). To find the required sales in dollars, multiply the required units by the selling price per unit: Required sales dollars = Required units * Selling price per unit. Since the contribution margin ratio (CM ratio) is the contribution margin per unit divided by the selling price per unit, CM ratio = $64 / $144. Therefore, Required sales dollars = $120,000 / (CM ratio) = $120,000 / ($64 / $144) = $270,000.

Assume the Following Cost Information for Marie Company _____ of Sales Dollars Is Required to Earn an After?tax