ACCOUNTING

Question

Audio sells headphones and would like to earn after tax profit of $400 every week. Each set of headphones costs $5 and is sold for $10. They also incur costs of $200 for rent and other fixed costs, and their tax rate is 20%. How many headphones must they sell per week to meet this goal?

Answer 1

Let h = # headphones

 

Assuming the tax rate applies on the revenue of 10h:

 

Cost:  5h + 200

Revenue: 10h - .2(10h) = 8h

 

8h - (5h + 200) = 400

8h - 5h - 200 = 400

3h = 600

h = 200

 

If we sell 200 headsets we make $400

----------------------------------------------------

 

Check:  Revenue = 10h = $2000

Cost: rent:  $200

         taxes: .2(2000) = $400 

         headphone cost: 5h = $1000

         Total Cost = $1600

 

Profit = revenue - cost = 2000 - 1600 = $400