Question

Hexon Printing Company projected the following information for next year: Selling price per unit $80 Contribution margin per unit $40 Total fixed costs $120,000 Tax rate 40% How many units must be sold to obtain an after-tax profit of $60,000

Answer 1

Break-even point in units= 5,500

Step-by-step explanation:

Giving the following information:

Selling price per unit $80

Contribution margin per unit $40

Total fixed costs $120,000

Tax rate 40%

Desired profit= $60,000

First, we need to calculate the earnings before tax:

EBT= desired profit / (1 - t)

EBT= 60,000 / (1 - 0.4)

EBT= $100,000

Now, the break-even point in units using the following formula:

Break-even point in units= (fixed costs + EBT)/ contribution margin per unit

Break-even point in units= (120,000 + 100,000) / (80 - 40)

Break-even point in units= 5,500