I need help

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  • #199288
    rsiddiqui
    Participant

    Almo developed its business plan based on the assumption that canopies would sell at a price of $400 each. The variable costs for each canopy were projected at $200, and the annual fixed-costs were budgeted at $100,000. Almo’s after-tax profit objective was $240,000; the company’s effective tax rate is 40 percent. If no changes are made to the selling price or cost structure, determine the number of units that Almo Company must sell in order to break-even.

    Why don’t you include the pretax profit in the calculation??

    rsiddiqui
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  • #753353
    Biff-1955-Tannen
    Participant

    If your fixed costs are $100,000, and you sell enough units to generate $100,000 gross profit pre tax, and then the tax man takes his share so now you have less than $100,000. You haven't really broken even have you?

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    #753354
    rsiddiqui
    Participant

    can you explain that in another way? Is it because it doesn't say to include pretax. Usually in the question stem it says something about pretax

    rsiddiqui
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