Hastings & Daughters produces and sells a component used in general aviation aircraft engines.
Each unit is priced at $25 and the variable cost for each unit is $17. The annual fixed cost is $112,000.
Hastings operates in a jurisdiction with a graduated tax structure and pays a rate of 25 percent on annual taxable income up to and including $100,000 and a rate of 40 percent on annual income above $100,000.
Required
a. How many units must Hastings & Daughters sell to break even?
b. Ms. Hastings, the president of Hastings & Daughters, decides that it is not worth being in business if the company cannot make at least $90,000 annually after taxes. How many units must Hastings & Daughters sell in order to make the $90,000 requirement?