Time-Adjusted Cost-Volume-Profit Analysis with Income Taxes

Assume The Hershey Company is considering the desirability of producing a new chocolate candy called Pleasure Bombs. Before purchasing the new equipment required to manufacture Pleasure Bombs, the company performed the following analysis:

Unit selling price	$2.50
Variable manufacturing and selling costs	(1.85)
Unit contribution margin	$0.65
Annual fixed costs
Depreciation (straight-line for 5 years)	$62,000
Other (all cash)	48,500
Total	$110,500

Because the expected annual sales volume is 200,000 units, Hershey decided to undertake the production of Pleasure Bombs. This required an immediate investment of $310,000 in equipment that has a life of four years and no salvage value. After four years, the production of Pleasure Bombs will be discontinued.

With a 20% tax rate and an 8% time value of money, determine the annual unit sales required to break even on a time-adjusted basis. Assume straight-line depreciation is used to determine tax payments.

Round UP to the nearest unit. Answer =

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