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Delectable Dish Printery publishes the best-selling Captain Cajun Cookbook that sells for $8. The company incurs variable costs of $3 per cookbook and total fixed costs are $300,000. If the company’s tax rate is 25%, how many cookbooks must be sold to generate $180,000 in net income? (Use contribution margin per unit to calculate the answer.) cookbooks

Answer :

jepessoa

Answer:

The answer is: 108,000 cookbooks

Explanation:

We can calculate how many Captain Cajun Cookbooks must be sold using the following formulas:

  • Units = (Fixed costs + Target profit) / (contribution margin per unit)
  • contribution margin per unit =  Selling price per unit – Variable cost per unit

contribution margin = $8 - $3 = $5

units = [$300,000 + ($180,000 / 75%)] / $5 = ($300,000 + $240,000) / $5

units = $540,000 / $5 = 108,000

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