Assume the following cost behavior data for Graphic Arts Company: Sales price $18.00 per unit
Variable costs $13.50 per unit
Fixed costs $22,500
Tax rate 40%
What volume of sales dollars is required to earn an after-tax income of $40,500?

Question

Quizplus · Accepted Answer

Explanation:Contribution Margin per unit = $18.00 - $13.50 = $4.50Contribution Margin Ratio = $4.50/$18.00 = 25%Break-even sales in units = $22,500/$4.50 = 5,000 unitsBreak-even sales in dollars = 5,000 units x $18.00 = $90,000Net income after taxes = $40,500Net income before taxes = $40,500/(1 - 0.40) = $67,500Sales in dollars = $67,500/0.25 = $270,000Therefore, the volume of sales dollars required to earn an after-tax income of $40,500 is $270,000.

Assume the Following Cost Behavior Data for Graphic Arts Company