Profit Planning with Taxes (LO3)

Chandler Manufacturing Company produces a product that it sells for $35 per unit. Last year, the company manufactured and sold 20,000 units to obtain an after-tax profit of $54,000. Variable and fixed costs follow.

Variable Costs per Unit Fixed Costs per Year MapuiacilininOmere orccsece 2 ST OmeMaAanUtacCruniinG meetin tenets $ 80,000 Selling and administrative ....... 7 Selling and administrative ... __ 30,000 OS lath ache aa 925°” Total shen ee $110,000 Required

a. Determine the tax rate the company paid last year.

b. What unit sales volume is required to provide an after-tax profit of $90,000?

c. If the company reduces the unit variable cost by $2.50 and increases fixed manufacturing costs by

$20,000, what unit sales volume is required to provide an after-tax profit of $90,000?

d. What assumptions are made about taxable income and tax rates in requirements

(a) through (c)?