Muy Mal Company, a producer of salsa, has the following information: $$\begin{array} { l l }
\text { Income tax rate } & 30 \% \
\text { Selling pric e per unit } & \$ 5.00 \
\text { Variable cost p er unit } & \$ 3,00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ must be sold to obtain a targeted after- tax income of $14,000.
A) 45,000 units
B) 55,000 units
C) 52,000 units
D) 60,000 units

Question

Muy Mal Company, a producer of salsa, has the following information: $$\begin{array} { l l } 
\text { Income tax rate } & 30 \% \
\text { Selling pric e per unit } & \$ 5.00 \
\text { Variable cost p er unit } & \$ 3,00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ must be sold to obtain a targeted after- tax income of $14,000.
A) 45,000 units
B) 55,000 units
C) 52,000 units
D) 60,000 units

Quizplus · Accepted Answer

To find the number of units needed to achieve a targeted after-tax income, first calculate the pre-tax income required: $14,000 / (1 - 0.30) = $20,000. Then, use the formula: (Fixed Costs + Pre-tax Income) / (Selling Price - Variable Cost) = (90,000 + 20,000) / (5 - 3) = 55,000 units.

Muy Mal Company, a Producer of Salsa, Has the Following