Cost Accounting Units and Sales to Earn After-Tax Target Profit... Please help f
ID: 2422205 • Letter: C
Question
Cost Accounting
Units and Sales to Earn After-Tax Target Profit... Please help fill in the (4) BLANKS. Thanks kindly!!
To convert before-tax income to after-tax income, divide the before-tax income by 1 minus the tax rate.
Example: Kalman Company has the following information:
Kalman wants to earn after-tax income of $7,440 next year. What is the before-tax income?
Suppose Kalman's tax rate was 35%, the before-tax income needed to earn $7,440 after taxes would be LOWER THAN $12,400.
The before-tax income in this case would be $ 11,446.0
The sales revenue needed to earn this level of before-tax income would be ******$BLANK ANSWER******* (round your intermediate calculations and final answer to the nearest dollar).
We can show that this is true by constructing an income statement:
Using the Kalman Company data, for each of the following scenarios, fill in the before-tax income needed and the sales revenue needed to earn the given after-tax income. (Round all dollar amounts to the nearest dollar.)
Price $10 Unit variable cost $2.6 Total fixed cost $33,400 Tax rate 40%Explanation / Answer
All figures are in $
Note:
Contribution margin = contribution / sales = $(10-2.6) per unit / $10 per unit = 0.74
Sales = Total contribution / contribution margin.
For example sales for the scenario A has been calculated as
= $44017 / 0.74 = $59482
A B C Before Tax Income 10617 9800 8493 Fixed cost 33400 33400 33400 Total contribution 44017 43200 41893 Contribution margin ratio 0.74 0.74 0.74 Required sales 59482 58378 56612 Checking sales 59482 58378 56612 Less: variable cost(26% of sales) 15465 15178 14719 Contribution 44017 43200 41893 Less: Fixed cost 33400 33400 33400 Operating profit(profit before tax) 10617 9800 8493 Less: tax @ 40% 4246.8 tax @ 35% 3430 tax @ 25% 2123.25 Profit after tax 6370 6370 6370