break even sales

fenil 12 April 2020 at 17:07 PM

Bruce Inc. has the following information about Rut, the only product it sells. The selling price for each unit is $20, the total variable cost per unit is $8, and total fixed cost for the firm is $60,000. The firm's current tax rate is 25%. If Bruce wants to earn $60,000 in profits after taxes, how many units must it sell? a) 15,000 b) 17,500 c) 10,000 d) 11,667

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FACULTY 09 May 2020 at 02:32 PM

Contribution per unit =sales - variable cost

=20-8

=12

fixed cost = 60000

current tax rate =25%

if Bruce wants to raise after tax profit of $60000,before tax profit should be = 60000/1-25%

=80000

So units sell to raise profit before tax 80000 = fixed cost + 80000/ contribution per unit

=60000+80000/12

=11667 (option d)