A company has fixed costs of $700,000.The selling price and variable cost per unit are $50.00,and $10.00,respectively.
How many units does the company need to sell to achieve net income of $100,000 after income tax,assuming the income tax rate is 50%?
A)2,500
B)18,000
C)22,500
D)17,500

Question

A company has fixed costs of $700,000.The selling price and variable cost per unit are $50.00,and $10.00,respectively. ​
How many units does the company need to sell to achieve net income of $100,000 after income tax,assuming the income tax rate is 50%?
A)2,500
B)18,000
C)22,500
D)17,500

Quizplus · Accepted Answer

To achieve a net income of $100,000 after tax at a 50% tax rate, the company needs a pre-tax income of $200,000. The total contribution margin per unit is $40 ($50 selling price - $10 variable cost). The required sales in units is calculated as: (Fixed Costs + Pre-tax Income) / Contribution Margin per Unit = ($700,000 + $200,000) / $40 = 22,500 units.

A Company Has Fixed Costs of $700,000