Sales to Reach After-Tax Profit

Lockwood Company currently sells its deadbolt locks for $30 each. The locks have a variable cost of $10, and the company's annual fixed costs are $150,000. The company's tax rate is 40 percent.

Required:

Calculate the number of locks that must be sold to earn an after-tax profit of $24,000. units

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1) Sales volume to reach after-tax profit = [fixed costs + after-tax profit/(1-tax rate)] divided by CM per unit. 2) Check: Sales - variable costs = CM - FC = before-tax profit. Calculate income tax, % multiplied by before-tax profit = net operating income.