a b 500 a B D E F G H 1 K M 1 Target Profit Measured in Units (with Taxes) 2 Optical Incorporated has annual fixed costs totaling $6,000,000 and variable costs of $350 per unit. Each unit of product is sold for $500. Assume a tax rate of 20 percent. 3 4 Required: 5 Use the three steps described in the chanter to determine how many units must be sold to earn an annual profit of $100,000 after taxes. (Round to the nearest unit) 6 Support the calculation in requiren structing a contribution income statement 7 b Use the three steps described in the chapter to determine the sales dollars required to earn an annual profit of $150,000 after taxes 8 Support the calculation in requirement b, by constructing a contribution income statement 9 10 Sales price per unit 500 Sales price per unit 100% 11 Variable cost per unit 350 Variable cost per unit 350 70% 12 Fixed costs per month 6,000,000 Fixed costs per month 6,000,000 13 Target profit, after tax 100,000 Target profit, after tax 150,000 14 15 Step 1. Determine the desired target profit after taxes (i.e., after accounting for income taxes). Step 1. Determine the desired target profit after taxes (i.e., after accounting for income taxes). 16 17 Step 2. Convert the desired target profit after taxes to the target profit before taxes. Step 2. Convert the desired target profit after taxes to the target profit before taxes. 18 Tax Rate 20% Tax Rate 20% 19 After tax Profit 100,000 After tax Profit 150,000 + 20 by (1-Tax rate) 125,000 /by (1-Tax rate) 187,500 21 Step 3. Use the target profit before taxes in the appropriate formula to calculate the target profit in Step 3. Use the target profit before taxes in the appropriate formula to calculate the target profit in 22 units or sales dollars. units or sales dollars. Profit Dollars CM Ratio X S Profit Profit V) 350 X # 6,000,000 Profit Units (( S 500 150 150 6.35 6.36 37 Q) Q) 6,100,000 6.27 28 29 6.000.000 6.30 31 6.33 X 6.57 Extra Credit + nisplay Settings Step 3. Use the target profit before taxes in the appropriate formula to calculate the target profit in units or sales dollars. Step 3. Use the target profit before taxes in the appropriate formula to calculate the target pr units or sales dollars. Profit Dollars Profit Profit Units (( S 500 X F Profit V) 350 CM Ratio X S F X Q) Q) 6,100,000 6,000,000 150 Q 3 6,000,000 150 Q Note: Only the "final answer" I this calculation will turn green. Q Note: Only the "final answer" I this calculation will turn green. 1 2. 3 34 Sales Less: Variable Contribution Margin Less: Fixed Operating Income Income tax Income after Tax Sales Less: Variable Contribution Margin Less: Fixed Operating Income Income tax Income after Tax 36 37 38 39 40 41 42 43 44 45 46 6.27 28 29 6.30 31 6.33 6.35 6.36 37 6.57 Extra Credit + L Display Settings Ready Accessibility: Investigate Type here to search 29F Mostly clear IT 99+