Assume total fixed costs of $160,000, variable costs per unit of $6, and contribution margin per unit of $4.How many units must be sold to meet a target net income of $50,000, assuming a tax rate of 20%?

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Quizplus · Accepted Answer

To meet a target net income of $50,000 after taxes, we first need to calculate the pre-tax income required. Since the tax rate is 20%, the pre-tax income needed is $50,000 / (1 - 0.20) = $62,500. The contribution margin per unit is $4, so to cover the total fixed costs and the desired pre-tax profit, we calculate the total units needed as follows: Total units = (Fixed Costs + Desired Pre-tax Profit) / Contribution Margin per Unit = ($160,000 + $62,500) / $4 = 55,625 units.

Assume Total Fixed Costs of $160,000, Variable Costs Per Unit