Question
KTR Company earns a $12 profit on each unit of manufactured goods, and it sells 24 million units each year. KTRs income tax rate is
KTR Company earns a $12 profit on each unit of manufactured goods, and it sells 24 million units each year. KTRs income tax rate is 20 percent. However, the jurisdiction in which KTR operates just increased the tax rate to 25 percent for next year. KTRs owners are considering two alternatives. They could simply accept the $14.4 million tax increase as a reduction in their after-tax profit, or they could raise the price of each unit by 60 cents, thereby increasing the profit per unit to $12.60. However, the marketing department estimates that the price increase could reduce annual sales to 22.8 million units. Calculate the taxable income, income tax costs, and after tax profit for each alternatives. Which alternative is better for KTRs owners?
KTR Company earns a $12 profit on each unit of manufactured goods, and it sells 24 million units each year. KTR's income tax rate is 20 percent. However, the jurisdiction in which KTR operates just increased the tax rate to 25 percent for next year. KTR's owners are considering two alternatives. They could simply accept the $14.4 million tax increase as a reduction in their after-tax profit, or they could raise the price of each unit by 60 cents, thereby increasing the profit per unit to $12.60. However, the marketing department estimates that the price increase could reduce annual sales to 22.8 million units. a. Calculate the taxable income, income tax costs, and after tax profit for each alternatives. b. Which alternative is better for KTR's owners? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the taxable income, income tax costs, and after tax profit for each alternatives. (Enter your answers in dollars not in millions of dollars.) Alternative 1 Alternative 2 Taxable income Income tax costs After tax profit Required A Required B >Step by Step Solution
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