Enola, SA., manufactures a product that sells for £500. The variable costs per u

Question

Enola, SA., manufactures a product that sells for £500. The variable costs per unit are: Direct materials £100; Direct labour £80 and Variable manufacturing overhead £50. During the year, the budgeted fixed manufacturing overhead is estimated to be £500,000, and budgeted fixed selling and administrative costs are expected to be £250,000. Variable selling costs are £20 per unit. The number of units that must be sold to generate an after-tax profit of £90,000 if there is a 40 percent tax rate is Select one: a. 3,700 units b. 3,600 units c. 3,900 units d. 4,000 units e. 3,800 units

Explanation / Answer

Required before-tax profit = 90000/(1-0.4)= 150000 Number of units that must be sold= (500000+250000+150000)/(500-100-80-50-20)= 3600 Option B is correct

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