LeBlanc Manufacturing has the following product information available:
$\begin{array}{ll}
\text { Sales price } & \$ 60 \text { per unit } \
\text { Variable costs } & \$ 20 \text { per unit } \
\text { Fixed costs } & \$ 50\text { 000 }
\end{array}$
If LeBlanc is in the 30% tax bracket,how many units need to be sold in order to earn an after-tax target profit of $490 000?

Question

Quizplus · Accepted Answer

First, we need to calculate the target profit before taxes:

Target profit before taxes = After-tax target profit / (1 - Tax rate) 
Target profit before taxes = $490,000 / (1 - 0.30) 
Target profit before taxes = $700,000

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

Contribution margin per unit = Selling price - Variable cost per unit 
Contribution margin per unit = $240 - $125 
Contribution margin per unit = $115

Using the contribution margin per unit, we can calculate the number of units required to reach the target profit before taxes:

Number of units = Target profit before taxes / Contribution margin per unit 
Number of units = $700,000 / $115 
Number of units = 6,087

Finally, we need to adjust for taxes:

Target profit after taxes = Target profit before taxes - (Target profit before taxes x Tax rate) 
Target profit after taxes = $700,000 - ($700,000 x 0.30) 
Target profit after taxes = $490,000

The closest answer choice is B) 18,750 units.

LeBlanc Manufacturing Has the Following Product Information Available If LeBlanc Is in the 30% Tax Bracket,how Many Units