Mount Carmel Company sells only two products, Product A and Product B.
Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount Carmel faces a tax rate of 30%. Mount Carmel desires a net after-tax income of $73,500. The number of units needed to be sold to achieve the desired after-tax profit would be

Question

Mount Carmel Company sells only two products, Product A and Product B.
 Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount Carmel faces a tax rate of 30%. Mount Carmel desires a net after-tax income of $73,500. The number of units needed to be sold to achieve the desired after-tax profit would be

Quizplus · Accepted Answer

Desired pre-tax net income $73,500/(1.0 -.3) = $105,000
Weighted contribution margin [2 × ($40 - $24)] + [1 × ($50 - $40)] = $42
Break-even point in composite units is ($105,000 + $840,000)/$42 = 22,500
22,500 composite units is (2 × 22,500) = 45,000 units of A and
(1 × 22,500) = 22,500 units of B

Mount Carmel Company Sells Only Two Products, Product a and Product