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Hello sir ,pls how do I calculate level of revenue needed to yield an after tax income equal to 20%of sales :
If SP IN UNIT IS #3000
VC IS 1800
FC IS 280420
TAX 35%
THANKS IN ANTICIPATION!Let V be the volume to be sold.
Pre-tax profit = V (3000 – 1800) – 280420 = 1200V – 280420
Post tax profit = 0.65 x [1200V – 280420]
This must be equal to: 0.2 x V x 3,000 = 600V
0.65[1200V – 280420] = 780V – 182273 = 600V
180V = 182273
V = 1012.63
Revenue = 1012.63 x 3000 = 3037883
Check: pretax profit = 3037884 – 1012.63 x 1800 – 280420 = 934729
post tax profit = 934729 x 0.65 = 60757420% revenue = 20% 3037883 = 60758
ie the same except for rounding errors.
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