AAA Company produced a product which had a selling price of $20 and a variable c

Question

AAA Company produced a product which had a selling price of $20 and a variable cost which amounted to 60% of sales. The company wants a profit after tax of $15,000. The tax rate is 20% and fixed costs amount to $60,000. AAA must sell.
A. 6,250 B. 7,396 C. 9,375 D. 9,844 AAA Company produced a product which had a selling price of $20 and a variable cost which amounted to 60% of sales. The company wants a profit after tax of $15,000. The tax rate is 20% and fixed costs amount to $60,000. AAA must sell.
A. 6,250 B. 7,396 C. 9,375 D. 9,844
A. 6,250 B. 7,396 C. 9,375 D. 9,844

Explanation / Answer

Selling price per unit = 20

Contribution margin per unit = 20*.4 = $8

Profit after tax = 15000

Profit before tax = (15000/.8) = $18,750

Add: Fixed cost = $60,000

Contribution margin = 60000+18750 = 78,750

No. of units sold = 78750/8 = 9,844

Answer - D. 9,844

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