If targeted after-tax net income is $27,000 with a 40 percent tax rate, contribution margin per unit is $0.80, and total fixed costs are $148,000, then the number of units that must be sold is
A) 218,750.
B) 241,250.
C) 160,833.
D) 167,250.

Question

Quizplus · Accepted Answer

To find the number of units that must be sold, first calculate the required pre-tax income by dividing the after-tax income by (1 - tax rate): $27,000 / (1 - 0.40) = $45,000. Then, add the fixed costs to the required pre-tax income: $45,000 + $148,000 = $193,000. Finally, divide this total by the contribution margin per unit: $193,000 / $0.80 = 241,250 units.

If Targeted After-Tax Net Income Is $27,000 with a 40