Answer (A) is correct . Because last year’s after-tax profit was $5,040, pretax net income must have been $8,400 [$5,040 ÷ (1.0?–?.40)]. Because fixed costs have been fully recovered at the BEP, all of the UCM beyond that sales level is included in pretax operating income. The UCM was $5.25, so the units sold in excess of the 20,000-unit BEP equaled 1,600 ($8,400 ÷ $5.25). If 21,600 total units were sold last year, an increase of 1,000 units results in sales of 22,600 units.
Answer (B) is incorrect because Assuming that last year’s after-tax profit was the pretax operating income results in 21,960 units.
Answer (C) is incorrect because Sales volume is estimated to be 22,600 units [20,000 + ($8,400 pretax NI ÷ $5.25 UCM) + 1,000].
Answer (D) is incorrect because Sales volume is estimated to be 22,600 units [20,000 + ($8,400 pretax NI ÷ $5.25 UCM) + 1,000].
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Sales for the coming year are expected to exceed last year’s by 1,000 units. If this occurs, Donnelly’s sales volume in the coming year will be
