Simin Corporation has a single product; its selling price is $140 and its variab

Question

Simin Corporation has a single product; its selling price is $140 and its variable cost is $60 per unit. The company’s monthly fixed expense is $40,000.

Using the equation method, solve for the unit sales that are required to earn a target profit before tax of $6,000.

Using the contribution margin approach, solve for the dollar sales that are required to earn a target profit before tax of $8,000.

Calculate the number of units that need to be sold to earn a after-tax income of $7,700, assuming a tax rate of 30%.

Explanation / Answer

SP 140 variable cost 60 contribution 80 a required contribution = 6000+40000 ie= 46000 units to be sold = 46000/80 575 b required contribution = 8000+40000 ie= 48000 units to be sold = 48000/80 600 c required contribution before tax = (7700/0.7)+40000 ie = 51000 units to be sold = 51000/80 637.5

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