Reference no: EM132795778
Question - Profit Planning with Taxes - Carron Net Company manufactures sports nets for virtually every outdoor sport. Assume Carron sells nets for $50, on average, per unit. Last year, the company manufactured and sold 30,000 nets to obtain an after-tax profit of $275,000. Variable and fixed costs follow.
Variable Costs per Unit Fixed Costs per Year
Manufacturing $20 Manufacturing $232,250
Selling and administrative 4 Selling and administrative 204,000
Total $24 Total $436,250
Required -
a. Determine the tax rate the company paid last year.
b. What unit sales volume is required to provide an after-tax profit of $400,000?
c. If the company reduces the unit variable cost by $4 and increases fixed manufacturing costs by $53,000, what unit sales volume is required to provide an after-tax profit of $400,000?
d. What assumptions are made about taxable income and tax rates in requirements (a) through (c)?
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