Question

Crane Machine Works produces soft serve ice cream freezers. The freezers sell for $17,000, and variable costs total $12,100 per unit. Crane incurs $25,860,000 in fixed costs during the year. The company’s tax rate is 28%. How many freezers must Crane sell to generate net income of $7,668,000? (Round answer to 0 decimal places, e.g. 5,275.)

Answer 1

Answer:

7,451

Explanation:

The net income is the profit/loss made after the deduction of all expenses from the revenue or sales made including taxes.

The cost elements includes the fixed cost and the variable cost which is dependent on the level of activities.

Given,

Fixed cost = $25,860,000

Variable cost per unit = $12,100

Selling price per unit = $17,000

Tax rate = 28%

Net income planned = $7,668,000

Let the number of freezers to be sold be p

17000p - (12100p + 25,860,000) - 0.28((17000p - (12100p + 25,860,000))= 7,668,000

0.72((17000p - (12100p + 25,860,000)) = 7,668,000

3528p = 7,668,000 + 18619200   = 26287200

p = 26287200  /3528

p = 7451

Crane Machine Works would have to sell 7,451 freezers to make a net profit of $7,668,000.