Answer:
What would be Delta’s desired pre-tax income?
It can be calculated as follow.
As after tax earning is 64% (100-36(tax rate))of of pretax earning, so
Post tax earning = 44,000/64% = $ 68,750
What would be break-even point in units to reach the income goal of $44,000 after taxes?
This can be calculated by dividing the sum of post tax earning and fixed cost with contribution per unit,
Break even = (68,750 + 15,250)/ (150-90) = 1400 units
What would be break-even point in sales dollars to reach the income goal of $44,000 after taxes?
Break even (in dollars) = sale price * Break even units
= 210,000 dollars
Create a contribution margin income statement to show that the break-even point calculated in B, generates the desired after-tax income.
Sales $ 210,000
Variable cost ($ 126,000)
Gross profit $ 84,000
Fixed Cost ($ 15,250)
Profit before Tax $ 68,750
Tax expense ($ 24,750)
Profit After Tax $ 44,000
