Ng Corporation produces and sells only one product; its selling price is $120 an

Question

Ng Corporation produces and sells only one product; its selling price is $120 and its variable cost is $96 per unit. The company’s monthly fixed expense is $42,000.

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

Using the formula method, determine for the dollar sales that are required to earn a target profit before tax of $7,000.

Using the formula method, calculate the number of units that need to be sold to earn an after-tax income of $9,000, assuming a tax rate of 25%.

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

Explanation / Answer

Selling price per unit = 120

Variable cost per unit = 96

Contribution per unit = 120-96 i.e 24 per unit

Fixed cost = 42000

Desired sales = Desired proft + Fixed cost / Contribution per unit

= 6000+42000/24 i.e 2000 units

2) Desired sales = 42000+7000/24 i.e 2041.667 units

3) Desired sales = 42000+12000/24 i.e 2250 units

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