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

Question

Quizplus · Accepted Answer

We can use the formula to calculate the number of units needed to be sold:

Target net income = (Unit contribution margin × Q) - Fixed costs - Taxes

Where: 
Unit contribution margin = Selling price - Variable cost per unit

Let's rearrange the formula to solve for Q:

Q = (Target net income + Fixed costs + Taxes) / Unit contribution margin

Substituting the given values:

Q = ($18,000 + $84,000 x 0.4) / ($6.00) 
Q = $58,800 / $6.00 
Q = 9,800 units

Therefore, Atkinson Company needs to sell 19,000 units to earn after-tax net income of $18,000.

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