Hunter & Sons sells a single model of meat smoker for use in the home. The smoke

Question

Hunter & Sons sells a single model of meat smoker for use in the home. The smokers have the following price and cost characteristics: Sales price Variable costs Fixed costs $ 78 per smoker 32 per smoker 363,400 per month Hunter & Sons is subject to an income tax rate of 40 percent. Required: a. How many smokers must Hunter & Sons sell every month to break even? Break-even sales in units b. How many smokers must Hunter & Sons sell to earn a monthly operating profit of $60,720 after taxes? Number of units sold

Explanation / Answer

a)Breakeven=fixed costs/(sales-variable cost per unit)
=363400/(78-32)
=7900 units

b)Operating profit=60720
Net profit=(sales-var cots-fixed costs)*(1-tax)
let no of units be "x"
60720/(1-40%)=(78-32)*X-363400
X=(101200+363400)/(78-32)
=10100

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