Use the Information Provided Below to Answer the Following Questions

question 2

Essay

Use the information provided below to answer the following questions: Required:
a.How many units would the company need to sell to earn $4,000 in operating income?
b.How many units would the company need to sell to earn $4,000 in net income if the tax rate is 20%?
c.By how much would operating income change from part (b) with a 10% increase in units sold?

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Definitions:

Inelastic Supply

A situation where the quantity of a good supplied by producers is relatively insensitive to changes in its price.

Tax Burden

The total amount of taxes that individuals or businesses are required to pay to government entities, often expressed as a percentage of income or profit.

Elasticity

A measure in economics to show how the quantity demanded or supplied of a good or service responds to a change in price.

Price Ceiling

A legally imposed maximum price on a good or service, intended to keep prices low for buyers.