Ch$16$ Homework

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CEX$\mathrm{.}16\mathrm{.}02.$ALGO

After$-$Tax Profit Targets

CEX$\mathrm{.}16\mathrm{.}03.$ALGO

CEX$\mathrm{.}16\mathrm{.}04.$ALGO

CEX$\mathrm{.}16\mathrm{.}05.$ALGO

Olivian Company wants to earn $$600,000$ in net $($after$-$tax$)$ income next year. Its product is priced at $$300$ per unit. Product costs include:

Direct materials $,$$$90\mathrm{.}00$

Direct labor $$66\mathrm{.}00$

Variable overhead $,$$$15\mathrm{.}00$

Total fixed factory overhead

$$440,000$

Variable selling expense is $$12$ per unit; fixed selling and administrative expense totals $$290,000.$ Olivian has a tax rate of $40$ percent.

Required:

Calculate the before$-$tax profit needed to achieve an after$-$tax target of $$600,000.$

$q,$

Calculate the number of units that will yield operating income calculated in Requirement $1$ above. If required, round your answer to the nearest whole unit.

$q,$ units

Olivian Company

Income Statement

For the Coming Year

For the Coming Year

Total

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$$ $

$$

$q,$

$q,$

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$q,$

$q,$

$q,$

$4.$ What if Olivian had a $35$ percent tax rate? Would the units sold to reach a $$600,000$ target net income be higher or lower than the units calculated in Requirement $2?$

Calculate the number of units needed at the new tax rate. In your calculations, round before$-$tax income to the nearest dollar. Round your answer to the nearest whole unit.

units