Exercise 2-3 DGA Tile manufactures ceramic flooring tiles. DGA's annual fixed costs are $740,000. The variable cost of each tile Page 38 is $0.25, and tiles are sold for $6.50. DGA has a combined state and federal tax rate of 45 percent. Required: a. How many tiles does DGA need to make and sell each year to earn an after-tax profit of $85,000? b. DGA must pay 10 percent of before-tax profits as a royalty payment to its founder. Now how many tiles must DGA make and sell to generate $85,000 after taxes? (Assume the royalty payment is not a tax-deductible expense.) Exercise 2-4 The Ralston Company produces three shirts. It only has 200 machine hours per day to produce shirts and has the following cost and production information: Selling price Variable cost of production Machine hours to complete one shirt Demand per day (shirts) Basic Deluxe Super $7.50 $9 $13 $6.00 $7 $7 0.6 2 3 50 50 50 Ralston has fixed costs of $75 per day. How many shirts of each type should be produced?