Jack's Jax has total fixed costs of $25,000. If the company's contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need to sell to produce a net income of $15,000? O A. 5,625 OB. 4,445 OC. 3,750 OD. 3,333

Jack's Jax has total fixed costs of $25,000. If the company's contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need to sell to produce a net income of $15,000? O A. 5,625 OB. 4,445 OC. 3,750 OD. 3,333

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

Jack's Jax has total fixed costs of $25,000. If the company's contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the
company need to sell to produce a net income of $15,000?
OA. 5,625
B. 4,445
C. 3,750
D. 3,333

Expert Solution

Step 1 Introduction

Contribution Margin :— It is the difference between sales revenue and total variable cost.

Contribution Margin Ratio :— It is calculated by dividing total contribution margin by total sales revenue.

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