Tiramisu Company projected the following information for next year: $\begin{array} { l }
\text {Selling price per unit }&\$60.00\
\text {Contribution margin per unit }&\$30.00\
\text {Total fixed costs }&\$100,000\
\text {Tax rate }&20\%\
\end{array}$

How many units must be sold to obtain an after-tax profit of $40,000?

Question

Tiramisu Company projected the following information for next year: $\begin{array} { l  }
 \text {Selling price per unit }&\$60.00\
 \text {Contribution margin per unit }&\$30.00\
 \text {Total fixed costs }&\$100,000\
 \text {Tax rate }&20\%\
\end{array}$

How many units must be sold to obtain an after-tax profit of $40,000?

Quizplus · Accepted Answer

First, calculate the before-tax profit needed to achieve an after-tax profit of $40,000. Use the formula: Before-tax profit = After-tax profit / (1 - Tax rate) = $40,000 / (1 - 0.20) = $50,000. Then, calculate the total profit needed (including fixed costs) = $50,000 + $100,000 = $150,000. Finally, divide by the contribution margin per unit to find the number of units: $150,000 / $30 = 5,000 units.

Tiramisu Company Projected the Following Information for Next Year How Many Units Must Be Sold to Obtain an After-Tax