Question

Olivian Company wants to earn $300,000 in net (after-tax) income next year. Its product is priced at $300 per unit. Product costs include: Direct materials $90.00 Direct labor $66.00 Variable overhead $15.00 Total fixed factory overhead $405,000 Variable selling expense is $12 per unit; fixed selling and administrative expense totals $255,000. Olivian has a tax rate of 40 percent. Required:

Answer 1

Answer: See explanation

Explanation:

Your question isn't complete but I checked online and found the remainder of the question to be:

"Calculate the before-tax profit needed to achieve an after-tax target of $300,000".

The before tax profit will be:

= After tax profit / (1 - Tax rate)

= $300,000 / (1 - 40%)

= $300,000 / (1 - 0.4)

= $300,000 / 0.6

= $500,000

Therefore, the before-tax profit needed to achieve an after-tax target of $300,000 will be $500,000