In 2019, X Company's profit function was 0.31R - $89,000, where R is revenue. In 2020, the relationship between revenue and variable costs will not change, but fixed costs will increase by $16,020. Assuming a tax rate of 35%, what will revenue have to be in order for X Company to earn $33,200 after taxes in 2020?

Revenue = $503,538.46

Explanation:

Giving the following information:

In 2019, X Company's profit function was 0.31R - $89,000, where R is revenue. In 2020, the relationship between revenue and variable costs will not change, but fixed costs will increase by $16,020.

Tax rate = 35%

Desired profit = 33,200

X = 0.31R - (89,000+16,020) = 0.31R - 105,020

We need to incorporate the effect of the tax rate:

X = [ (0.31R - 105,020) * (1-t) ]

33,200 = [ (0.31*R) - 105,020] * (1-0.35)

33,200/0.65 = 0.31R - 105,020

51,076.92 + 105,020 = 0.31R

503,538.46 = R