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12 June, 13:15

The following information pertains to Korning Corp.: Selling price per unit $ 670 Variable cost per unit $ 250 Total fixed costs $ 327,600 Income tax rate 35 % How many total units must be sold to obtain an after-tax profit (πA) of $47,775?

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  1. 12 June, 14:10
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    955 unit

    Explanation:

    Data provided in the question:

    Selling price per unit = $670

    Variable cost per unit = $250

    Total fixed costs = $327,600

    Income tax rate = 35%

    After tax Desired profit = $47,775

    Now,

    Before tax profit = [ After tax Desired profit ] : [1 - Tax rate ]

    = $47,775 : [1 - 0.35 ]

    = $73,500

    Contribution required = Total fixed costs + Before tax profit

    = $327,600 + $73,500

    = $401,100

    Contribution margin per unit = Selling price per unit - Variable cost per unit

    = $670 - $250

    = $420

    Therefore,

    No of unit required to be sold

    = [ Contribution required ] : [Contribution margin per unit ]

    = $401,100 : 420

    = 955 unit
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