# What are the sales in dollars required to earn a net income (after tax) of \$40,000 in the following scenario? Bear Corporation sells product G for \$150 per unit. The variable cost per unit is \$105. The fixed costs are \$720,000, and Bear is in the 25% corporate tax bracket.

The income required to be earned is \$40000. Let the number of units to be sold for that be N.

The variable costs for each unit are \$105 and the fixed costs per unit are 720,000/N. The tax that is paid on the profit is 25%.

Each product is sold...

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

The income required to be earned is \$40000. Let the number of units to be sold for that be N.

The variable costs for each unit are \$105 and the fixed costs per unit are 720,000/N. The tax that is paid on the profit is 25%.

Each product is sold for \$150.

So the net profit made on selling N units is (150*N - 105*N - 720000)*(1 - 25%)

This should be equal to \$40000

=> (150*N - 105*N - 720000)*(1 - 25%)= \$40,000

=> (45N - 720000)*(1 - 25%)= \$40,000

=> (45N - 720000)*(0.75)= \$40,000

=> (45N - 720000)= \$40,000/0.75

=> 45N = (40,000/0.75 + 720000)

=> N = (40,000/0.75 + 720000)/45

In terms of dollars, as each product costs \$150, the required sales are \$150*N

=> (40,000/0.75 + 720000)*150/45

=> 2577777.78

The required sales are \$2,577,777.78 to earn a profit of \$40000

Approved by eNotes Editorial Team