Kingman Corp. has been concerned with maintaining a solid annual profit. The com
ID: 2502569 • Letter: K
Question
Kingman Corp. has been concerned with maintaining a solid annual profit. The company sells a line of fire extinguishers that are prefect for homeowners for an average of $10 each.. The company has perfected its production process and now produces extinguishers with a variable cost of $4 per extinguisher. Kingman's annual fixed cost are $92,000. Kingman's tax rate is 40%.
Hint Given: First calculate sales $ and then divide by the selling price of $10 per unit to get unit sales
Calculate the number of extinguishers Kingman must sell to earn an after-tax profit of $60,000.
Explanation / Answer
SP = $10
vc = $4
fc = 92000
tAX = 40
EARNING BEFORE TAX = 6X-92000
60000=EBT*(1-.4)
EBT = 60000/.6 = $100000
100000 = 6X-92000
X = 192000/6 = 32000 UNITS he must sell
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