Fennier Company sells a single product for $12 per unit. Variable costs are $7 per unit and fixed costs are $65,000.
How many units must Fennier sell to earn $14,000 after income tax, assuming a 20% tax rate?

Question

Quizplus · Accepted Answer

After tax profit = Pre-tax profit x (1 - Tax rate)
$14,000 = Pre-tax profit x (1 - 0.20)
Pre-tax profit = $14,000 / (0.80) = 17,500
Desired units = (Fixed costs + Desired Profit) / Unit contribution Margin
Desired units = ($65,000 + $17,500) / ($12 - $7)
Desired units = 16,500 units

Fennier Company Sells a Single Product for $12 Per Unit