Example: Kalman Company has the following information: Price $12 Unit variable cost Total fixed cost $3 $31,500 Tax rate 40 % Kalman wants to earn after-tax income of $9,000 next year. What is the before-tax income? Before-tax income = $9,000/(1 -0.4) = $15,000 (Round to the nearest dollar). The sales revenue Suppose Kalman's tax rate was 35%, the before-tax income needed to earn $9,000 after taxes would be needed to earn this level of before-tax income would be $ (Round to the nearest dollar). We can si $15,000. The before-tax income in this case would be $ is is true by constructing an income statement. equal to $60,461 higher 15,115 Sales Total variable cost (0.25 x $60,461) Contribution margin Total fixed cost lower $45,346 31,500 Operating income $13,846 Less: income taxes (0.35 x $13,846) 4,846 After-tax income $9,000 Using the Kalman Company data, for each of the following scenarios, fill in the before-tax income needed and the sales revenue needed to earn the given after-tax income. Round all dollar amounts to the nearest dollar. Target After-Tax Income Needed Sales Revenue $8,000 Tax Rate 40% 35% 25% Before-Tax Income $ $ $ $8,000 $8,000