Posted by **Jessie** on Tuesday, March 6, 2012 at 9:02pm.

Stan's Cans, Inc. expects to earn $150,000 next year after taxes on sales of $2,200,000. Stan's manufactures only one size of garbage can and is located in the small, but beautiful, town of Mount Dora, Florida. Stan sells his cans for $8 a piece and they have a variable cost of $2.40 a piece. Stan's tax rate is currently 34%.

a. What are the firm's expected fixed costs for next year?

b. What is the break-even point in units?

- Math -
**Steve**, Wednesday, March 7, 2012 at 10:55am
after-tax revenue = 66% of 2,200,000 = 1452000

revenue from n cans = 8n

cost for n cans is f + 2.4n

where f is the fixed cost.

after-tax income = 8n*.66 = 5.28n

earnings = income less expenses

2200000/8 = 275000 cans

150000 = 1452000 - f - 2.4(275000)

150000 = 792000 - f

f = 642000

So, earnings = 5.28n - f - 2.4n

= 2.88n - 642000

at breakeven, earnings = 0, so

0 = 2.88n - 642000

n = 222916.6, or 222917

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