[michelle71]

The SELLING PRICE required to earn a net profit after tax equal to 10% of sales revenue assuming 250,000 units are manufactured and sold.

Fixed costs = $440,000
unit variable cost is 2.40
Tax rate is 40%


UVC $2.40 x 250,000 units = $600,000 + FC $440,000 = TC $1,040,000

TC $1,040,000 x 10% = $104,000/.060 = $173,333 Net profit before tax

Add Profit $173,333 + FC $440,000 + VC $600,000 = $1,213,333/250,000 units = [B]Answer $4.85 USP

[rehmanvohra]

Your attempt is correct up to the calculation of total variable and fixed costs. I think you should reconsider your answer because, the net income rate of 10% is after tax. You seem to have calculated profit on total costs.

Try this format:
Sales
Less: Variable costs
Contribution
Less: Fixed costs
Profit before tax
Less: Tax
Profit after tax