Answer (D) is correct . If X represents the necessary selling price, 25,000 equals maximum sales volume, $16 is the variable cost per unit, $450,000 is the total fixed cost, and $125,000 [$75,000 target after-tax profit ÷ (1.0 – .40)] is the desired pre-tax profit, the following formula may be solved to determine the requisite unit price: 25,000 (X – $16) – $450,000 = $125,000 25,000X – $400,000 – $450,000 = $125,000 25,000X = $975,000 X = $39
Answer (A) is incorrect because The amount of $37.00 does not consider income taxes.
Answer (B) is incorrect because The amount of $36.60 excludes depreciation.
Answer (C) is incorrect because The amount of $34.60 does not include depreciation or taxes.
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Delphi Company’s management has stipulated that it will not approve the continued manufacture of the new product after the next fiscal year unless the after-tax profit is at least $75,000 the first year. The unit selling price to achieve this target profit must be at least