Answer the following questions using the information below:
Assume the following cost information for Fernandez Company:
$\begin{array}{lr}
\text { Selling price } & \$ 120 \text { per unit } \
\text { Variable costs } & \$ 80 \text { per urit } \
\text { Total fixed costs } & \$ 80,000 \
\text { Taxrate } & 40 \%
\end{array}$
-What is the number of units that must be sold to earn an after-tax net income of $42,000?
A) 3,750 units
B) 4,625 units
C) 3,050 units
D) 1,875 units

Question

Answer the following questions using the information below:
Assume the following cost information for Fernandez Company:
 $\begin{array}{lr}
\text { Selling price } & \$ 120 \text { per unit } \
\text { Variable costs } & \$ 80 \text { per urit } \
\text { Total fixed costs } & \$ 80,000 \
\text { Taxrate } & 40 \%
\end{array}$
-What is the number of units that must be sold to earn an after-tax net income of $42,000?
A) 3,750 units
B) 4,625 units
C) 3,050 units
D) 1,875 units

Quizplus · Accepted Answer

The correct answer is A.Explanation:To earn an after-tax net income of $42,000, the company must first calculate its pre-tax net income. This is done by subtracting the variable costs and total fixed costs from the selling price per unit and multiplying the result by the number of units sold. The equation is as follows:Pre-tax net income = (Selling price per unit - Variable costs per unit) * Number of units sold - Total fixed costsSubstituting the given values into the equation, we get:Pre-tax net income = ($120 - $80) * Number of units sold - $80,000Pre-tax net income = $40 * Number of units sold - $80,000To calculate the number of units that must be sold to earn an after-tax net income of $42,000, we need to divide the pre-tax net income by the after-tax net income and multiply the result by 100%. The equation is as follows:Number of units sold = (Pre-tax net income / After-tax net income) * 100%Substituting the given values into the equation, we get:Number of units sold = ($42,000 / $42,000) * 100%Number of units sold = 100%Therefore, the company must sell 100% of its units, or 3,750 units, to earn an after-tax net income of $42,000.

Answer the Following Questions Using the Information Below: Assume the Following

Answer the Following Questions Using the Information Below:
Assume the Following