Question

"​Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $ 1 comma 100​, variable costs are $ 500​, and fixed costs are $ 120 comma 000. How many dresses must the Bridal Shoppe sell to yield afterminustax net income of $ 21 comma 000​, assuming the tax rate is 30​%?"

Answer 1

250 dresses

Step-by-step explanation:

The first task would be to compute before tax net income when after tax net income is $21,000 at the tax rate of 30%

After tax net income=before tax net income*(1-t)

t is the tax rate of 30% or 0.30

after tax net income is $21,000

$21000=before tax net income*(1-0.3)

$21,000=0.7*before net income

before tax net income=$21,000/0.7=$30,000

Target units for before tax net income of $30,000 is computed thus:

target number of dresses=fixed cost+target profit/contribution per unit

fixed cost is $120,000

contribution per unit=sales price-variable cost

=$1,100-$500=$600

target number of dresses=($120,000+$30,000)/$600=250 dresses