Forms, Inc.wants to sell a sufficient quantity of products to earn an after-tax profit of $40,000.If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $80,000, how many units must be sold to earn income of $40,000? Forms, Inc.has a tax rate of 40%.

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Quizplus · Accepted Answer

First, calculate the after-tax profit goal: $40,000 / (1 - 0.4) = $66,667. Then, find the contribution margin per unit: $10 - $8 = $2. Next, calculate the total contribution needed: $66,667 + $80,000 = $146,667. Finally, divide by the contribution margin per unit: $146,667 / $2 = 73,334 units.