Sheer Elegance, Inc. Sales price per pair of stockings :$2.00 Variable expense p

Question

Sheer Elegance, Inc.

Sales price per pair of stockings                   :$2.00

Variable expense per pair of stockings        :0.8

Contribution margin per pair of stocking      :%1.2

Fixed expense per year:

Building rental                                                     12000

Equipment depreciation                                     3000

Selling                                                                   30000

Administrative                                                      15000

Total fixed expense                                             60000

Assume Sheer Elegance pays taxes and its corporate tax rate is 35%. How many pairs of stockings must be sold to earn

an after-tax profit of $9,000?

Explanation / Answer

Hi,

Please find the answer as follows:

Sales = Fixed Cost + Desired Profit/(Contribution Per Unit) = (60000 + 9000)/1.2 = 57500 pairs must be sold.

Answer is 57500 pairs.

Thanks.

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