2 Assume the following information for Andrew Company Sellin

2) Assume the following information for Andrew Company: Selling price per unit Variable cost per unit Total fixed costs After-tax net income Tax rate $100 $80 $80,000 $40,800 40% How many units must be sold to achieve the after-tax net income? A) 6,040 B) 7,800 C) 7,400 D) 7,770

Solution

Option (A) 6,040 units is correct.

Calculation of no. units sold to attain after tax profit of $40,800.

No. of units to be sold to attain required profit = (fixed cost + required profit) /

                                                                                Contribution per unit

Contribution per unit = selling price – Variable cost

                                   = $100 - $80 = $20

No. of units to be sold to attain required profit = ($80,000 + $40,800) / $20

                                                                            = $120,800 / $20

                                                                              = $6,040