If total fixed costs are $62,000, contribution margin per unit is $5.00, and targeted after-tax net income is $12,000 with a 40 percent tax rate, then the number of units that must be sold is
A) 16,400.
B) 14,800.
C) 24,667.
D) 11,440.

Question

Quizplus · Accepted Answer

The contribution margin per unit is $5.00, and the targeted after-tax net income is $12,000 with a 40 percent tax rate. So, the before-tax net income is $12,000 / (1 - 0.40) = $20,000. The total fixed costs are $62,000. So, the number of units that must be sold is $20,000 + $62,000 / $5.00 = 16,400 units.

If Total Fixed Costs Are $62,000, Contribution Margin Per Unit