Flitwick Company charges a selling price of $50 per unit for its single product, incurs variable costs of $30 per unit, and total fixed costs of $400,000.
What sales volume is necessary to earn a net income after tax of $72,000, assuming a tax rate of 25%?

Question

Quizplus · Accepted Answer

After tax profit = Pre-tax profit x (1 - Tax rate)
$72,000 = Pre-tax profit x (1 - 0.25)
Pre-tax profit = $72,000 / (0.75) = $96,000
Desired units = (Fixed costs + Desired Profit) / Unit contribution Margin
Desired units = ($400,000 + $96,000) / ($50 - $30)
Desired units = 24,800 units

Flitwick Company Charges a Selling Price of $50 Per Unit