Kelvin Co. produces and sells socks. Variable costs are budgeted at $4 per pair,

Question

Kelvin Co. produces and sells socks. Variable costs are budgeted at $4 per pair, and fixed costs for the year are expected to total $90,000. The selling price is expected to be S6 per pair. The sales units required for Kelvin Co. to make a before-tax profit of $12,000 are: The sales dollars required for Kelvin Co. to make a before-tax profit of $10,000 are: The sales units required for Kelvin Co. to make an after-tax profit of $15,000, given an income tax rate of 40%, are: The sales dollars required to make an after-tax profit for Kelvin Co. of $15,000, given an income tax rate of 40%, are calculated to be:

Explanation / Answer

Fixed cost = 90000 Selling price /unit= 6 Variable cost /unit= 4 Net profit per unit= 2 Before tax profit required 12000 No. of units to be sold = (Before tax profit required + fixed cost)/net profit per unit 51000 Fixed cost = 90000 Selling price /unit= 6 Variable cost /unit= 4 Net profit per unit= 2 Before tax profit required 10000 No. of units to be sold = (Before tax profit required + fixed cost)/net profit per unit 50000 Sales dollars= No. of units sold * sales price 300000 Fixed cost = 90000 Selling price /unit= 6 Variable cost /unit= 4 Net profit per unit= 2 After tax profit required 15000 Tax rate 40% No. of units to be sold = (After tax profit required + fixed cost(1 - tax rate)/(net profit per unit*(1-tax rate)) 60000 Sales dollars= No. of units sold * sales price 360000

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