Meadow Glow Company desires an after-tax profit of $140,000.Its sales price and variable costs are $100 and $40 per unit,respectively.Fixed costs total $340,000.Assuming a 30% tax rate,how many units must Meadow Glow sell to achieve its desired profit?

Question

Quizplus · Accepted Answer

First, we need to calculate the total amount of profit needed before taxes:

Desired after-tax profit / (1 - tax rate) = $140,000 / (1-0.30) = $200,000

Next, we need to calculate the contribution margin per unit:

Sales price - Variable costs = $100 - $40 = $60

Using the contribution margin per unit, we can calculate the number of units needed to achieve the desired profit:

Fixed costs + Desired profit before taxes / Contribution margin per unit =

$340,000 + $200,000 / $60 =

$540,000 / $60 =

9,000 units

Therefore, the company must sell 9,000 units to achieve its desired after-tax profit of $140,000.

Meadow Glow Company Desires an After-Tax Profit of $140,000