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?

Question

Asa Herring

Business

7 May, 11:00

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?

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Answers (1)

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Milagros Dillon · 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