Question

Presented below is Oxford Ltd.’s income statement for 20x5:

	Sales (37020 units)	$893630
	Variable costs	-358325
	Contribution Margin	535305
	Fixed Expenses	-196705
	Operating Income	338600
	Income tax expense	-142212
	Net Income	$196388

How many units must Oxford Ltd. sell in order to generate net income equal to $266223?

Answer 1

• Working

A	Income Tax Expense	$142,212
B	Operating Income before tax	$338,600
C = (A/B) x 100	Income tax rate	42%
D = 100% - C	% by which net income equals to operating income	58%

• Answer calculation

A	Target Net Income	$266,223
B = A/58%	Operating Income required	$459,005
C	Fixed expense	$196,705
D = B+C	Total contribution margin required	$655,710
E = $ 535305 / 37020 units	Contribution margin per unit	$                      14.46
F = D/E	Units required to generate Net Income of $ 266223	45,347 units or 45,346 units = Answer

• ANSWER Note: Due to rounding off, the answer can either be:
  45,347 units, or
  45,346 units