Kim's Cupcakes has total fixed costs of $23,997. If the company's contribution margin is 20%, the income tax rate is 15% and the selling price of a box of Cupcakes is $15, how many boxes of Cupcakes would the company need to sell to produce a net income of $12,750?

The company need to sell 12,999 boxes to produce a net income of $12,750.

Explanation:

Contribution per unit = Price * Contribution Margin ratio  

Contribution per unit =$15 * 0.20  

Contribution per unit =$3

Net Income before tax= $12,750 / (1 - 0.15) = $12,750 / 0.85

=$15,000

Boxes of Cupcakes to sell = [Fixed cost + Net income ] / Contribution per unit

= (23,997 + 15,000) / 3

= 38997 / $3

= 12,999 boxes

The company need to sell 12,999 boxes to produce a net income of $12,750.

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