Question

Holland Corporation earned an after-tax net income of $182,000 last year. Fixed costs were $750,000. The selling price per unit of its product was $130, of which $60 was a contribution to fixed cost and net income. The income tax rate was 35%.

Round UP answers to the nearest unit, when applicable.
How many units of product were sold last year?
...... units

Answer 1

The number of units sold by Holland Corporation last year was calculated by finding the before-tax income from the after-tax net income, adding it to the fixed costs, and dividing by the contribution per unit. The final rounded up figure is 17,167 units.

Step-by-step explanation:

To determine how many units Holland Corporation sold last year, we need to take into account both the after-tax net income and the contribution per unit to fixed costs and net income. Based on the information provided, the after-tax net income was $182,000. Since the income tax rate was 35%, we need to find the before-tax income, which is the amount that, after being taxed at 35%, results in the after-tax net income of $182,000.

The before-tax income can be found using the formula:

Before-tax Income = After-tax Income / (1 - Tax Rate)

Before-tax Income = $182,000 / (1 - 0.35)

Before-tax Income = $182,000 / 0.65

Before-tax Income = $280,000

We add this to the fixed costs to find the total amount needed to break even:

Total Break-even Amount = Fixed Costs + Before-tax Income

Total Break-even Amount = $750,000 + $280,000

Total Break-even Amount = $1,030,000

Divide this by the contribution per unit to find the number of units sold:

Number of Units Sold = Total Break-even Amount / Contribution per Unit

Number of Units Sold = $1,030,000 / $60

Number of Units Sold = 17,166.67

Since we round up to the nearest unit, the final answer is 17,167 units sold last year.