Kelvin Co.produces and sells socks.Variable costs are $4 per pair,and fixed costs for the year total $90,000.The selling price is $6 per pair.The sales units required to make an after-tax profit of $15,000,given an income tax rate of 40 percent,are:

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Quizplus · Accepted Answer

To find the required sales units, first calculate the before-tax profit needed: $15,000 / (1 - 0.40) = $25,000. Then, use the formula: Required units = (Fixed Costs + Before-tax Profit) / Contribution Margin per unit. Contribution Margin per unit = Selling Price - Variable Cost = $6 - $4 = $2. Required units = ($90,000 + $25,000) / $2 = 57,500 units.

Kelvin CoProduces and Sells Socks