Answer:
Explanation:
Answer:
A) Total Additional Sales Revenue =
B) Total Sales Revenue =
Explanation:
Requirement A
We know, according to the break-even formula, Target Profit = Target Sales - Variable expense - Fixed Cost - Tax
(according to the net income after tax)
As we need to find target sales, we do not have the variable expense and as the tax is based on the target profit, the new equation is -
Target Profit = (Sales - Variable expense - Fixed Expense) (1 - Tax Rate)
Target Profit = (Sales - Sales × 44% - $188,000) × (1 - 0.28)
$50,400 = (Sales - 0.44 Sales - $188,000) × 0.72
or, Sales - 0.44 Sales - $188,000 = $50,400 ÷ 0.72
or, Sales - 0.44 Sales = $70,000 + $188,000
or, 0.56 Sales = $258,000
Sales = $258,000 ÷ 0.56
Sales = $460,714 (Approx)
Therefore, the company does not need to sell more to cover the tax rate. The sale of the company will decrease by $1,286.
Req. B
The company's total sales revenue will be $460,714 to cover fixed costs, variable costs, and net income after tax.
It can be showed under the following calculation
Sales $460,714
Less: Variable expense (44% of sales) $(202,714)
Contribution Margin $258,000
Less: Fixed Expense $(188,000)
Net Income before tax $70,000
Less:Tax (70,000*28%) $(19,600)
Net income after tax = $50,400
