Question

    If H Ltd. Is subject to an effective income tax rate of

    40%, the number of units H Ltd. Would have to sell to earn an after-tax profit of 90,000 is:
    A 1,00,000 units Correct Answer Incorrect Answer
    B 1,20,000 units Correct Answer Incorrect Answer
    C 1,12,000 units Correct Answer Incorrect Answer
    D 1,45,000 units Correct Answer Incorrect Answer
    E 1,55,000 units Correct Answer Incorrect Answer

    Solution

    Calculation of Desired Profit before tax: After tax of 40% = 90,000 Before tax = 90,000/60% = Rs. 150,000 Sales units to earn profit of 90,000 after tax = FC + Desired Profit before tax / Contribution per unit 210,000+150,000 / 3 = 120,000 units

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