A company 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%.

Required:

a. Use the three steps to determine how many units must be sold to earn an annual profit of $100,000 after taxes;

Sales price per unit= Variable cost per unit= Fixed costs per month= Target profit, after tax=

Step 1. Determine the desired target profit after taxes

Step 2. Convert the desired target profit after taxes to the target profit before taxes

Step 3. Use the target profit before taxes in the appropriate formula to calculate the target profit in units or sales dollars.

b. Use the three steps to determine the sales dollars required to earn an annual profit of $150,000 after taxes.

Sales price per unit= Variable cost per unit= Fixed costs per month= Target profit, after tax=

Step 1. Determine the desired target profit after taxes

Step 2. Convert the desired target profit after taxes to the target profit before taxes

Step 3. Use the target profit before taxes in the appropriate formula to calculate the target profit in units or sales dollars.