Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

تمرين 16

AFTER-TAX PROFIT TARGETS
Cherrington Company wants to earn $420,000 in net (after-tax) income next year. Its product is priced at $480 per unit. Product costs include:

Variable selling expense is $45 per unit; fixed selling and administrative expense totals $340,000. Cherrington has a tax rate of 30 percent.
Required:
1. Calculate the before-tax profit needed to achieve an after-tax target of $420,000.
2. Calculate the number of units that will yield operating income calculated in Requirement 1 above.
3. Prepare an income statement for Cherrington Company for the coming year based on the number of units computed in Requirement 2.
4. What if Cherrington had a 35 percent tax rate? Would the units sold to reach a $420,000 target net income be higher or lower than the units calculated in Requirement 3? Calculate the number of units needed at the new tax rate.