Legacy Company is considering the production and sale of a new product with the

Question

Legacy Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250. Legacy is subject to a 25% tax rate. Determine the dollar sales needed to generate an after-tax income of $33,000. Legacy Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250. Legacy is subject to a 25% tax rate. Determine the dollar sales needed to generate an after-tax income of $33,000.

Explanation / Answer

Contribution margin = 18 - 8.10 = $9.90
Contribution margin ratio = 9.90/18 x 100% = 55%

After tax profit = $33000
Before tax profit must be 33000/0.75 = $44000

Number of units required = (44000 + 8250)/9.90 = 5278 units
Dollar sales that would be needed = (44000 + 8250)/0.55 = $95000

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.