Question

In 2018, X Company sold 6,800 units of its only product for $36.10 each. Unit costs were as follows: Variable manufacturing $14.50 Fixed manufacturing 2.35 Variable selling 5.11 Fixed selling 2.63 Total 24.59 In 2019, the selling price, variable costs per unit, and total fixed costs are not expected to change. Assuming a tax rate of 39%, how many units must X Company sell in 2019 in order to earn $63,000 after taxes?

Answer 1

Answer The correct answer is 8.317 units

Explanation:

Firstly, calculate the Total fixed costs= ($2.35+$2.63)*6800= $33.864 Fixed Manufacturing and Selling cost

Secondly, calculate the earnings before taxes 63.000/(1-tax rate) = 63.000(/1-0.39)= 103.278.69

Then, Calculate the Revenue less fixed cost  103.278.69+33.864=137.142,68

Then calculate the Variable margin that is equal to ( Price of sales per unit – Variable manufacturing – Variable selling) = (36.10-14.50-5.11)= 16.49

Finally divide the revenue less fixed cost on the variable margin (137.142,68/16.49) = 8316.72

                                     Units                        Price    Total

Revenue                             8,316.72                    36.10      300,233.54  

Fixed Manufacturing                                                  (15,980.00)

Variable manufacturing    8,316.72                    14.50      (120,592.42)

Fixed Selling                                                                    (17,884.00)

Variable Selling                 8,316.72                      5.11         (42,498.43)

Net Revenue                                                                     103,278.69  

Tax rate                                                                39%        (40,278.69)

Total                                                                            63,000.00