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Good evening sir,a question is been giving me problem, pls how do I calculate: level of revenue needed to yield an after tax income equal to a given percentage on sales?
2..how to calculate percentage changein the profit if sales is increased by a given percentage….
Thanks in anticipation.1 Profit before tax = SPv – VCv – FC where SP – sales oprice per unit, VC = variable cost per unit and v = volume in units.
If the tax rate is t, then profit after tax is (1 – t)(SPv – VCv – FC)
If you require after tax profit to be p% of revenue, then:
p xSPv = (1 – t)(SPv – VCv – FC)
You would put in the figures you are given and solve for v. Hence the required revenue is SPv
2 Profit before tax = SPv – VCv – FC
Work out the starting profit, then increase the sales volume by whatever % you are given and work out the new profit. The % increase in the two profits is then easily worked out.
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