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Homework answers / question archive / Your firm plans to earn $2,600,000 after taxes next year
Your firm plans to earn $2,600,000 after taxes next year. Sales will be $18,000,000. Your firm manufactures truck components which sell for $1,200 each. Your firm has a 60% contribution margin, a 35% tax rate, and no outstanding debt. What are next year's expected fixed costs?
Contribution margin ratio=Contribution margin/Sales
Contribution margin=(18,000,000*60%)
=$10,800,000
| Contribution margin | 10,800,000 |
| Less:Fixed costs(balance)(10,800,000-4,000,000) | $6,800,000 |
| EBT(100%)(2,600,000/0.65) | 4,000,000 |
| Less:taxes@35%(4,000,000*35%) | 1,400,000 |
| Net income(65%) | 2,600,000 |
