Breakeven analysis and target profit, taxes - Patterson Parkas Company's sales revenue is $30 per unit, variable costs are $19.50 per unit, and fixed costs are $147,000.
a) Compute Patterson's contribution margin per unit and contribution margin ratio.
b) Determine the number of units Patterson must sell to break even.
c) Determine the sales revenue required to earn (pretax) income equal to 20% of revenue.
d) How many units must Patterson sell to generate an after-tax profit of $109,200 if the tax rate is 35%?
e) Patterson is considering increasing its advertising expenses by $38,500. How much of an increase in sales units is necessary from expanded advertising to justify this expenditure (generate an incremental contribution margin of $38,500)?